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Tests for the validity of portfolio or group choice in financial and panel regressions

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dc.contributor.author Inoue, Atsushi
dc.contributor.author Rossi, Barbara, 1971-
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2017-07-26T12:08:02Z
dc.date.available 2017-07-26T12:08:02Z
dc.date.issued 2015-03-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1523
dc.identifier.uri http://hdl.handle.net/10230/26827
dc.description.abstract In the capital asset pricing model (CAPM), estimating beta consistently is important to obtain a consistent estimate of the price of risk. However, it is often found that the estimate of beta is sensitive to the choice of portfolios used in the estimation. This paper provides a new test to evaluate whether the choice of portfolios in typical asset price regressions is valid, in the sense that the portfolios satisfy two conditions: (i) the way the portfolios are formed are exogenous; and (ii) the choice of the group of assets to include in the portfolios provides enough information to identify the parameters of interest. Thus, checking the validity of the portfolio choice is an important pre-requisite to ensure consistent estimates of the parameters of the model. We illustrate the performance of the test in small samples via Monte Carlo simulations.The proposed test is also applicable to group and pseudo panel data models.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1523
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Tests for the validity of portfolio or group choice in financial and panel regressions
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2017-07-23T02:16:51Z
dc.subject.keyword Macroeconomics and International Economics
dc.rights.accessRights info:eu-repo/semantics/openAccess

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