Simulated nonparametric estimation of dynamic models with applications to finance
Filippo Altissimo and
Antonio Mele
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
Abstract:
This paper introduces a new class of parameter estimators for dynamic models, called Simulated Nonparametric Estimators (SNE). The SNE minimizes appropriate distances between nonparametric joint (or conditional) densities estimated from sample data and nonparametric joint (or conditional) densities estimated from data simulated out of the model of interest. Sample data and model-simulated data are smoothed with the same kernel. This makes the SNE: 1) consistent independently of the amount of smoothing (up to identifiability); and 2) asymptotically root-T normal when the smoothing parameter goes to zero at a reasonably mild rate. Furthermore, the estimator displays the same asymptotic efficiency properties as the maximum-likelihood estimator as soon as the model is Markov in the observable variables. The methods are flexible, simple to implement, and fairly fast; furthermore, they possess finite sample properties that are well approximated by the asymptotic theory. These features are illustrated within the typical estimation problems arising in financial economics.
Keywords: nonparametric estimation; asset pricing; continuum of moments; simulations (search for similar items in EconPapers)
JEL-codes: C14 C15 C32 G12 (search for similar items in EconPapers)
Pages: 83 pages
Date: 2005-05-19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://eprints.lse.ac.uk/24658/ Open access version. (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24658
Access Statistics for this paper
More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().