A new method is proposed for estimating linear triangular models, where identification results from the structural errors following a bivariate and diagonal GARCH(1,1) process. The associated estimator is a GMM estimator shown to have the usual √T-asymptotics. A Monte Carlo study of the...

We propose a simple and intuitive method for estimating betas when factors are measured with error: ordinary least squares instrumental variable estimator (OLIVE). OLIVE performs well when the number of instruments becomes large, while the performance of conventional instrumental variable...

Efficient GMM estimation of the semi-strong GARCH(1,1) model requires simultaneous estimation of the conditional third and fourth moments. This paper proposes a simple alternative to efficient GMM based upon the unconditional skewness of residuals and the autocovariances of squared residuals. An...

A test of the CAPM is developed conditional on a prior belief about the correlation between the true market return and the proxy return used in the test. Consideration is given to the effect of the proxy's mismeasurement of the market return on the estimation of the market model. Failure to...

We show that the compensation for rare events accounts for a large fraction of the equity and variance risk premia in the S&P 500 market index. The probability of rare events vary significantly over time, increasing in periods of high market volatility, but the risk premium for tail events...

Recent research has focused on modelling asset prices by Itô semimartingales. In such a modelling framework, the quadratic variation consists of a continuous and a jump component. This paper is about inference on the jump part of the quadratic variation, which can be estimated by the difference...

We suggest an iterated GMM approach to estimate and test the consumption based habit persistence model of Campbell and Cochrane (1999), and we apply the approach on annual and quarterly Danish stock and bond returns. For comparative purposes we also estimate and test the standard CRRA model. In...

We propose a new and flexible non-parametric framework for estimating the jump tails of Itô semimartingale processes. The approach is based on a relatively simple-to-implement set of estimating equations associated with the compensator for the jump measure, or its "intensity", that only...

This paper reviews basic notions of return variation in the context of a continuous-time arbitrage-free asset pricing model and discusses some of their applications. We first define return variation in the infeasible continuous-sampling case. Then we introduce realized measures obtained from...

We provide a new framework for estimating the systematic and idiosyncratic jump tail risks in financial asset prices. The theory underlying our estimates are based on in-fill asymptotic arguments for directly identifying the systematic and idiosyncratic jumps, together with conventional...