Simulated Moments Estimation of Markov Models of Asset Prices

Darrell Duffie and Kenneth J Singleton

Econometrica, 1993, vol. 61, issue 4, 929-52

Abstract: This paper provides a simulated moments estimator of the parameters of dynamic models in which the state vector follows a time-homogeneous Markov process. Conditions are provided for both weak and strong consistency as well as asymptotic normality. Various trade-offs among the regularity conditions underlying the large sample properties of the simulated moments estimator are discussed in the context of an asset-pricing model. Geometric ergodicity of the underlying Markov process plays a central role in the analysis, ensuring that the simulated processes are asymptotically stationary with an ergodic distribution that is independent of starting values. Copyright 1993 by The Econometric Society.

Date: 1993
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Working Paper: Simulated Moments Estimation of Markov Models of Asset Prices (1990)
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