GARCH-based identification of triangular systems with an application to the CAPM: still living with the roll critique

Todd Prono ()

No 07-1, Working Papers from Federal Reserve Bank of Boston

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 time-varying 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. ; Quantitative Analysis Unit Working Paper QAU07-2

Keywords: capital asset pricing model; time series analysis (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-fmk
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Citations: View citations in EconPapers (2)

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