A Simple, Consistent Estimator for Disturbance Components in Financial Models / James A. Levinsohn, Jeffrey K. MacKie-Mason.

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Levinsohn, James A

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Material type: Text

TextSeries: Technical Working Paper Series (National Bureau of Economic Research) ; no. t0080.Publication details: Cambridge, Mass. National Bureau of Economic Research 1989.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Many recent papers have estimated components of the disturbance term in the "market model" of equity returns. In particular, several studies of regulatory changes and other policy events have decomposed the event effects in order to allow for heterogeneity across firms. In this paper we demonstrate that the econometric method applied in some papers yields biased and inconsistent estimates of the model parameters. We demonstrate the consistency of a simple and easily-implemented alternative method.

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Working Paper	Biblioteca Digital	Colección NBER	nber t0080 (Browse shelf(Opens below))	Not For Loan

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October 1989.

Many recent papers have estimated components of the disturbance term in the "market model" of equity returns. In particular, several studies of regulatory changes and other policy events have decomposed the event effects in order to allow for heterogeneity across firms. In this paper we demonstrate that the econometric method applied in some papers yields biased and inconsistent estimates of the model parameters. We demonstrate the consistency of a simple and easily-implemented alternative method.