Statistical Estimation for CAPM with Long-Memory Dependence

We investigate the Capital Asser Pricing Model (CAPM) with time dimension. By using time series analysis, we discuss the estimation of CAPM when market portfolio and the error process are long-memory process and correlated with each other. We give a sufficient condition for the return of assets in t...

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Bibliographic Details
Published in:Advances in decision sciences 2012-12, Vol.2012 (2012), p.1-12
Main Authors: Amano, Tomoyuki, Kato, Tsuyoshi, Taniguchi, Masanobu
Format: Article
Language:English
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Summary:We investigate the Capital Asser Pricing Model (CAPM) with time dimension. By using time series analysis, we discuss the estimation of CAPM when market portfolio and the error process are long-memory process and correlated with each other. We give a sufficient condition for the return of assets in the CAPM to be short memory. In this setting, we propose a two-stage least squares estimator for the regression coefficient and derive the asymptotic distribution. Some numerical studies are given. They show an interesting feature of this model.
ISSN:2090-3359
2090-3367
DOI:10.1155/2012/571034