Alternative Methods to Deal with Measurement Error

Cheng-Few Lee (), Hong-Yi Chen () and John Lee ()
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Cheng-Few Lee: Rutgers University, Department of Finance and Economics, Rutgers Business School
Hong-Yi Chen: National Chengchi University, Department of Finance
John Lee: Center for PBBEF Research

Chapter Chapter 7 in Financial Econometrics, Mathematics and Statistics, 2019, pp 181-210 from Springer

Abstract: Abstract This chapter discusses how errors-in-variablesErrors-in-variables problems affect estimators in the regression model. In addition, we show alternative methods to deal with measurement errorMeasurement error of estimation regression coefficient. These alternative methods include the classical estimation method, the constrained classical methodClassical method, the grouping methodGrouping method, the instrumental variable methodInstrumental variable method, the maximum likelihood methodMaximum likelihood method, the LISREL and MIMIC methods, and the Bayesian approachBayesian approach. Examples using these alternative methods in finance research are also discussed.

Keywords: Bayesian approach; Capital asset pricing model; Capital structure; Classical method; Cost of capital; Errors-in-variables; Grouping method; Instrumental variable method; Investment equation; Mathematical programming method; Maximum likelihood method; Measurement error; LISREL method (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4939-9429-8_7

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DOI: 10.1007/978-1-4939-9429-8_7

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