Application of Simultaneous Equation in Finance Research: Methods and Empirical Results

Cheng-Few Lee, John Lee, Jow-Ran Chang and Tzu Tai
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Cheng-Few Lee: Rutgers University, Department of Finance
John Lee: Center for PBBEF Research
Jow-Ran Chang: National Tsing Hua University, Department of Quantitative Finance
Tzu Tai: Mezocliq, LLC

Chapter Chapter 31 in Essentials of Excel, Excel VBA, SAS and Minitab for Statistical and Financial Analyses, 2016, pp 969-991 from Springer

Abstract: Abstract Based upon the paper by Chen and Lee (2010) and Lee et al. (2015), we will first discuss the development of 2SLS, 3SLS, and generalized method of moments (GMM). Then, we will use GE as an example to show how SAS program can be used to estimate simultaneous equations system in terms of 2SLS, 3SLS, and GMM. In the second section, we will develop the model specification for 2SLS, 3SLS, and GMM. In the third section, we will discuss the simultaneous equation system for investment policy, financing policy, and dividend policy. In the fourth section, we will use GE data to show how simultaneous equation system can be estimated by 2SLS, 3SLS, and GMM in terms of SAS program. The GE data is presented in Appendix 1. The SAS program used to estimate these different methods will be presented in Appendix 2. Finally, in the fifth section, we summarize the results.

Keywords: Simulation equator; Identification problem; Model specification; Investment policy; Financing policy; Dividend policy; Speed of adjustment coefficient; Consumption expenditure; Rational income; Investment expenditure; Ordinary (OLS); Structure equation; Net income depreciation; Dividends; Preferred dividends (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-38867-0_31

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DOI: 10.1007/978-3-319-38867-0_31

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