A Simple, Consistent Estimator for Disturbance Components in Financial Models

James Levinsohn and Jeffrey Mackie-Mason

No 80, NBER Technical Working Papers from National Bureau of Economic Research, Inc

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.

Date: 1989-10
Note: ME
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Published as The Review of Economics and Statistics, Vol. LXXII, No. 3, pp. 516-520, August 1990.

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Related works:
Journal Article: A Simple, Consistent Estimator for Disturbance Components in Financial Models (1990)
Working Paper: A SIMPLE, CONSISTENT ESTIMATOR FOR DISTURBANCE COMPONENTS IN FINANCIAL MODELS (1989)
Working Paper: A SIMPLE, CONSISTENT ESTIMATOR FOR DISTURBANCE COMPONENTS IN FINANCIAL MODELS (1989)
Working Paper: A SIMPLE, CONSISTENT ESTIMATE FOR DISTURBANCE COMPONENTS IN FINANCIAL MODELS (1989)
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