 Arbitrage Pricing with Heterogeneous Spatial Effects and Heteroscedastic Disturbances*Jianhua Hu, Hao Ding and Xiaoqian Liu Journal of Financial Econometrics, 2023, vol. 21, issue 4, 1169-1195 Abstract: We develop a heterogeneous spatial arbit and regression coefficients, and heteroscedastic variances, and further establish identification of parameters and asymptotic normality of the conditional QML estimators under some mild conditions. We apply the proposed model to study a real data set of 11 eurozone stock index returns and extend the Fama–French five-factor model to regional stock indices, in which heterogeneous spatial effects and heteroscedastic disturbances are highly significant and they both play very important roles in explaining distinct endogenous effects and distinct risks of the 11 eurozone stock markets. Our empirical results reveal unique characteristics of each of 11 eurozone stock markets and their inner connections. Keywords: conditional quasi-maximum-likelihood estimator; Fama–French models; heterogeneous spatial arbitrage pricing model; heterogeneous spatial interaction (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:jfinec:v:21:y:2023:i:4:p:1169-1195. Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani More articles in Journal of Financial Econometrics from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
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