The econometric analysis of models with risk terms

The econometric analysis of models with risk terms In this paper we have attempted to provide an integrated approach to the estimation of models with risk terms. It was argued that there exist orthogonality conditions between variables in the information set and higher‐order moments of the unanticipated variable density. These could be exploited to provide consistent estimators of the parameters associated with the risk term. Specifically, it was recommended that an IV estimator should be applied, with instruments constructed from the information set. Four existing methods commonly used to estimate models with risk terms are examined, and applications of the techniques are made to the estimation of the risk term in the $US/$C exchange market, and the effects of price uncertainty upon production. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Econometrics Wiley

The econometric analysis of models with risk terms

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Publisher
Wiley
Copyright
Copyright © 1988 John Wiley & Sons, Ltd.
ISSN
0883-7252
eISSN
1099-1255
DOI
10.1002/jae.3950030202
Publisher site
See Article on Publisher Site

Abstract

In this paper we have attempted to provide an integrated approach to the estimation of models with risk terms. It was argued that there exist orthogonality conditions between variables in the information set and higher‐order moments of the unanticipated variable density. These could be exploited to provide consistent estimators of the parameters associated with the risk term. Specifically, it was recommended that an IV estimator should be applied, with instruments constructed from the information set. Four existing methods commonly used to estimate models with risk terms are examined, and applications of the techniques are made to the estimation of the risk term in the $US/$C exchange market, and the effects of price uncertainty upon production.

Journal

Journal of Applied EconometricsWiley

Published: Apr 1, 1988

References

  • Large sample properties of generalized method of moments estimators
    Hansen, Hansen
  • Price unpredictability and monetary standards: a comment on Klein's measure of price uncertainty
    Ibrahim, Ibrahim; Williams, Williams
  • The capital formation problem in the United States
    Malkiel, Malkiel

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