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Title:GARCH-based identification of triangular systems with an application to the CAPM: Still living with the roll critique PDF Logo
Authors:Prono, Todd
Issue Date:2007
Series/Report no.:Working paper series // Federal Reserve Bank of Boston 07-1
Abstract:This paper presents a new method for identifying triangular systems of time-series data. Identification is the product of a bivariate GARCH process. Relative to the literature on GARCH-based identification, this method distinguishes itself both by allowing for a timevarying covariance and by not requiring a complete estimation of the GARCH parameters. Estimation follows OLS and standard univariate GARCH and ARMA techniques, or GMM. A Monte Carlo study of the GMM estimator is provided. The identification method is then applied in testing a conditional version of the CAPM.
Subjects:Triangular systems
endogeneity
identification
conditional heteroskedasticity
generalized method of moments
GARCH
GMM
CAPM
JEL:C13
C32
G12
Document Type:Working Paper
Appears in Collections:Working Paper Series, Federal Reserve Bank of Boston

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