On the Damodaran Estimator of Price Adjustment Coefficients

Patrik Säfvenblad ()
Additional contact information
Patrik Säfvenblad: Dept. of Finance, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden

No 208, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: This paper investigates the properties of the Damodaran (Journal of Finance, 1993) estimator of price adjustment. It is concluded that strong bias and low precision of the Damodaran estimator renders it useless for empirical work, even when the available sample size is very large. As an alternative, a GMM-based estimator is derived. Its properties are significantly better than those of the Damodaran estimator. However, for empirical applications it is still preferable to estimate price adjustment speeds using concurrent information from related time series.

Keywords: Informational efficiency; price adjustment; GMM estimation; power test; simulation (search for similar items in EconPapers)
JEL-codes: C13 C15 G14 (search for similar items in EconPapers)
Pages: 11 pages
Date: 1997-11-21
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://swopec.hhs.se/hastef/papers/hastef0208.pdf.zip (application/pdf)
http://swopec.hhs.se/hastef/papers/hastef0208.pdf (application/pdf)
http://swopec.hhs.se/hastef/papers/hastef0208.ps.zip (application/postscript)
http://swopec.hhs.se/hastef/papers/hastef0208.ps (application/postscript)

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:hhs:hastef:0208

Access Statistics for this paper

More papers in SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Helena Lundin ().