Article

Large Sample Properties Generalized Method of Moments Estimators

Authors:
To read the full-text of this research, you can request a copy directly from the author.

Abstract

This paper studies estimators that make sample analogues of population orthogonality conditions close to zero. Strong consistency and asymptotic normality of such estimators is established under the assumption that the observable variables are stationary and ergodic. Since many linear and nonlinear econometric estimators reside within the class of estimators studied in this paper, a convenient summary of the large sample properties of these estimators, including some whose large sample properties have not heretofore been discussed, is provided.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the author.

... For example in the case of an upcoming press release, press-release induced order flow may cause an immediate quote update and portfolio rebalancing (Vayanos, 2001). Hansen (1982) introduced the two-step generalized method of moments (GMM) to applied economics and finance, where it provides a generic method for estimating finite-dimensional parameters in semi-parametric models. GMM starts by positing a centralized moment condition, a system of q × 1 potentially nonlinear equations E[g( 0 , x i )] = 0 used to estimate parameters 0 ∈ ℜ p . ...
... Generalized method of moments (Hansen, 1982) estimation was applied to an ELOB model restricted to the four best quotes on both sides yielding 13 moment conditions: 4 break-even (5), 8 updating (6), and 1 market order size (7). Time ticks represent the arrival of a market order, and the ELOB state is shown just ahead of the next market order arrival. ...
Article
Full-text available
This research identified predictors of cryptocurrency liquidity and explored whether cryptocurrency is a true cash equivalent. Liquidity is important because cryptocurrencies aim to be cash substitutes, and thus totally liquid. Greater liquidity is correlated with more profitable trading, better price discovery; and more profitable market operation. The research tested five hypotheses concerning liquidity and its predictors, for a set of cryptocurrencies that represent ~ 90% of volume and market capitalization, thus are generalizable. Price was strongly supported as a predictor of liquidity, while volume was not. Fungibility, in the sense of ‘mutual interchangeability of particular pairs of cryptocurrencies, was not found to be a good predictor of liquidity, leading us to question whether cryptocurrencies can truly be considered ’cash equivalents’. I also tested whether price and volume embedded in own-price elasticity was a predictor of liquidity, and rejected this hypotheses. Finally, an analysis involving step-wise regression unambiguously selected a combination (3) daily volume, and (4) own-price elasticity. Explanatory power was somewhat better than other predictors, allowing future research to incorporate these findings to construct better models of liquidity in blockchain-enabled markets.
... Example 2: Nonlinear IV and GMM. Amemiya (1977), Hansen (1982), Hansen et al. (1996) introduced nonlinear IV and GMM estimators that maximize ...
... 2. The smooth nonlinear stationary and dynamic GMM and Quasi-likelihood models of Hansen (1982), Gallant and White (1988) and Pötscher and Prucha (1997), covering Gordin(mixingale type) conditions and near-epoch dependent processes such as ARMA, GARCH, ARCH, and other models alike; ...
Preprint
Full-text available
This paper studies computationally and theoretically attractive estimators called the Laplace type estimators (LTE), which include means and quantiles of Quasi-posterior distributions defined as transformations of general (non-likelihood-based) statistical criterion functions, such as those in GMM, nonlinear IV, empirical likelihood, and minimum distance methods. The approach generates an alternative to classical extremum estimation and also falls outside the parametric Bayesian approach. For example, it offers a new attractive estimation method for such important semi-parametric problems as censored and instrumental quantile, nonlinear GMM and value-at-risk models. The LTE's are computed using Markov Chain Monte Carlo methods, which help circumvent the computational curse of dimensionality. A large sample theory is obtained for regular cases.
... Two tests were used to test the validity of SGMM and DGMM estimated coefficients in the models, and these include the Sargan/Hansen J tests and the Arellano and Bond Autoregressive (AR 2) test. Results presented in Table 4-5 indicates that the Hansen's (1982) J tests values are insignificant which suggests the validity of over identifying restrictions, confirming that the employed sets of instruments in the regression model are not endogenous, and the values of the Arellano-Bond (1991) tests which examines whether error terms have correlation do not reject the absence of second order serial correlation in all estimated models. Aggregate of the home country economics risk (E), financial risk (F) and political (P) risk data shown in Table A1-A3 computed as 0.5( + + ) is used as proxy for home country composite risk (ICRG, 2017). ...
... This implies that the error structures of the model are serially uncorrelated, suggesting that the results are valid, and the model's specifications derived in section 4.2 are appropriate. Beside the AR (2) test, the values of Hansen's (1982) J tests are insignificant, indicating that the over identifying restrictions are valid and the specification instruments are valid. The proliferation of instrument which can weaken both autocorrelation and Hansen tests specification, remain one major drawback in GMM estimator. ...
Article
Full-text available
Socially responsible mutual funds (SRMF) and the "antisocially conscious", Vitium Global Fund Barrier Fund (formerly known as the Vice Fund, the term used in this paper) returns, volatility patterns, and causal effects are examined in this study within the context of the lessons learned from the 2008 Global Economic and Financial Crisis (GEFC). In times of a new and unprecedented crisis due to the COVID-19 pandemic, a look back to our recent past reveals that volatility patterns on daily stock returns presented some level of predictability on prices for both types of funds. The research findings are significant as funds' potential predictability could help market players when designing their investment strategies. More specifically, an increase in volatility persistence is found after the GEFC, together with an increase in the Vice Fund's resilience to market shocks. Although all funds, without substantial differences, take time to absorb the shocks. A noteworthy outcome relates to SRMF that was able to achieve higher returns and exhibited lower volatility levels during the crisis period. Whereas the Vice Fund revealed long-run sustainable performance offering fund managers and investors investment opportunities that are endorsed by the fund performance over the period. Furthermore, unidirectional causality was found running from the Vice Fund to the SRMF, exhibiting a clear dominance during the GEFC period. The research findings contribute to the debate on the future of socially responsible investment, indicating that SRMF appears to be driven by "antisocially conscious" funds signaling limited rewards for investors inclined to invest in funds that are considered socially responsible.
... Genelleştirilmiş Momentler Metoduna Hansen (1982) daha önce diğer araştırmacılarca çalışılmamış koşullar altında tahmin edicilerin tutarlılığı ile asimptotik normalliği hakkında bir tartışma sağlamasıyla katkıda bulunmuştur. (Hansen, 1982(Hansen, , s. 1050. ...
... Genelleştirilmiş Momentler Metoduna Hansen (1982) daha önce diğer araştırmacılarca çalışılmamış koşullar altında tahmin edicilerin tutarlılığı ile asimptotik normalliği hakkında bir tartışma sağlamasıyla katkıda bulunmuştur. (Hansen, 1982(Hansen, , s. 1050. Bu yöntemin avantajı güçlü dağılım varsayımlarına gerek olmadan modeli ve tahmin edicileri formüle edebilmesidir. ...
... Based on the Akaike information criterion, we use three lags of the variables in our VAR model. At three lags, Hansen's (1982) J statistic also becomes insignificant (i.e., error terms are uncorrelated with additional lags), giving us further confidence that our model is set properly. Finally, we construct an impulse response function (IRF) graph using the VAR estimates that will allow us to examine the influence of lockdowns on bond spreads and the persistence of this influence through time. ...
... The underlying vector autoregression regression dynamically models Average Spread , ln(1 + New Cases in the State ), ln(1 + Vaccination in the State ), and Shutdown variables. Based on the Akaike information criterion and Hansen's (1982) J statistic, we use three lags of the variables to estimate this model. Shutdown is a dummy variable that indicates if a state is shut down in a week. ...
Article
We study how investors in the US municipal bond market price the state lockdowns announced during the coronavirus (COVID) pandemic. To begin with, we examine the extent to which state-level COVID developments influence yield spreads of municipal bonds. We find that macro-level factors are the primary determinants of municipal bond spreads during the pandemic, but state-level COVID developments also matter at the margin. For instance, a doubling of new COVID cases in a state is associated with a 2% (1.4 basis points) increase in yield spreads of municipal bonds issued in that state. Accordingly, lockdowns may decrease municipal bond spreads by reducing COVID cases, but lockdowns may also increase them by reducing local economic activities. Overall, we find that yield spreads in both primary and secondary municipal bond markets increase by about 15% following lockdown announcements, suggesting that lockdown announcements increase the risk premiums investors require for holding municipal bonds.
... La robustesse des résultats issus de l'estimateur des moments dépend de la qualité des instruments retenus. Les instruments ont été appréciés à l'aide d'un test de la statistique J de Hansen (1982) qui évalue la nullité de la covariance entre la liste des instruments et le terme d'erreur. D'après le résultat de ce test présenté au tableau 1.4, les conditions d'orthogonalité sont validées au seuil de 5%. ...
... Différents estimateurs MMG peuvent être obtenus selon le choix de la matrice A lorsqu'il y a des restrictions de sur-identification. Hansen (1982) montre alors qu'on peut obtenir des estimateurs MMG efficaces, étant donné les variables instrumentales, en choisissant pour cette matrice l'inverse de la matrice de variance covariance des moments de l'échantillon. En effet, l'équation (2) représente la statistique J qui est la valeur minimum de la fonction objective. ...
Thesis
La présente thèse dont l’opportunité pourrait être bien saisie à travers les difficultés des pays de la CEMAC à soutenir de manière stable l’activité, propose une analyse de l’efficacité de la politique monétaire de la BEAC à partir d’une investigation mettant en selle le niveau de congruence de certains éléments essentiels à cette politique, avec les caractéristiques économiques des pays de la zone. Dans le premier chapitre, nous discutons de la pertinence de l’objectif d’inflation de la BEAC, et montrons à partir d’une courbe de Phillips hybride, puis à l’aide d’un modèle non linéaire à transition lisse, que l’objectif actuel de 3%, nettement inférieur à l’objectif empiriquement évalué à 4,53%, limite sa capacité à lisser la conjoncture. Dans le deuxième chapitre, nous poursuivons l’analyse en nous interrogeant sur la capacité des autorités à tirer parti du supplément d’efficacité qu’offrirait une cible proche de 4,53%. L’évaluation du mécanisme de transmission montre que la forte immunité du système bancaire aux chocs monétaires compromet significativement l’efficacité de la politique monétaire. Le relèvement de la cible d’inflation ne produirait donc les effets attendus qu’en présence d’un système bancaire moins résilient aux innovations de politique monétaire. Le troisième chapitre qui se situe dans le prolongement des deux premiers, est consacré à l’identification de la règle de politique monétaire la plus apte à stabiliser le système économique des pays de la CEMAC. L’investigation économétrique effectuée à l’aide d’un modèle dynamique avec anticipations rationnelles permet de conclure à la supériorité des règles de masse monétaire sur les règles de taux d’intérêt, et de légitimer l’ancrage monétaire de la BEAC, adopté à la faveur des réformes introduites à la fin des années 1980.
... However, to ensure the validity of our estimates, we conducted Arellano-Bond test for error serial correlation at the second order, AR (2), following Arellano and Bond (1991). We also conducted the Hansen (1982) test for over-identifying restrictions, which is preferred to the Sargan test because it is consistent in the presence of autocorrelation. Furthermore, regional investigations were conducted in this study using the quantile regression approach in Eq. (2). ...
... The results from these robustness estimations are reported in Appendices Tables 5, 6, 7, 8, 9 and 10. All the models in Table 3 and Appendices Tables 5, 6, 7, 8, 9 and 10 we subjected to Arellano-Bond tests for error serial correlation and Hansen (1982) tests for over-identifying restrictions. The results indicate the absence of autocorrelation problem as well as the presence of valid over-identifying restrictions in all cases. ...
Article
Full-text available
In recent years, the global economy has witnessed several uncertainty-inducing events. However, empirical evidence in Africa on the effects of economic policy uncertainty (EPU) on economic activities remains scanty. Besides, the moderating effect of governance institutions on the uncertainty-economic performance relationship in Africa and the likelihood of regional differences in the response of economic activities to EPU on the continent are yet to be investigated. To address these gaps, we applied system GMM and quantile regressions on a panel of forty-seven African countries from 2010 to 2019. We find that while global EPU and EPUs from China, USA and Canada exert considerable influence on economic performance in Africa, the effects of domestic EPU and EPUs from Europe, UK, Japan, and Russia were negligible, suggesting that African economies are resilient to these sources of uncertainty shocks. We also find that governance institutions in Africa are not significantly moderating the uncertainty-economic performance relationship. However, our results highlighted regional differences in the response of economic activities to uncertainty, such that when compared to East and West Africa, economic performance in Central, North and Southern Africa is generally more resilient to global EPU and EPUs from China, USA, Europe and UK. We highlighted the policy implications of these findings.
... In essence, the present study adopts the two-step System-GMM technique in accordance with Roodma [70] and Windmeijer [72]. Further, the efficiency and persistent nature of this estimator are usually subjected to Arellano and Bond's [73] AR(1) and AR(2) tests of the serial correlation properties and Hansen's [74] J-test of overidentifying restrictions. ...
Article
Full-text available
This study examines the impactful role played by trade facilitation (TF) in promoting or hindering food security in a panel of 34 sub-Saharan countries for the period 2005–2019. The empirical evidence is based on the Two-Step Dynamic System Generalized Method of Moments estimator, employed to account for econometric concerns bothering on unobserved heterogeneity and potential endogeneity inherent in the variables used. The empirical findings show that the nature of TF procedures, which are inefficient, negatively impact food security in SSA. These effects are evident on the availability and accessibility dimensions of food security as well as their composite index. While it is noted that this result runs counter to the established a priori of positive signs on the one hand, it however portrays the reality of the economic phenomenon in SSA on the other / hand. In balance, the present TF regime can best be described as anti-food security as suggested by the prevailing burdensome procedures involved in exporting and importing staple food items. The functional roles of population growth and institutional quality are empirically enhanced divergently. Going forward, we recommend that for food sufficiency and Sustainable Development Goals to be achieved quickly, governments within the region would need to finetune the underlying modalities of the present TF regime
... The validity of instruments is tested by the Hansen J-test (Hansen 1982), controlling the orthogonality of all instruments, and by the Arellano-Bond test of autocorrelation [AR(2)], controlling the validity of lagged instruments (Arellano and Bond 1991). ...
... We applied the GMM approach because the ordinary least squares (OLS) regression methodology does not address the problem of endogeneity that occurs when the independent variables are correlated with the error term. To address this problem and obtain reliable estimates, we use the Generalized Method of Moments (GMM) introduced by Hansen (1982). The GMM model also controls for autocorrelation and heteroskedasticity of unknown form (Musa et al, 2021). ...
Article
Full-text available
We investigate the effect of abnormal increase in credit supply on economic growth in Nigeria after controlling for the quality of the legal system, size of central bank asset, banking sector cost efficiency and bank insolvency risk. The abnormal increase in credit supply has a significant effect on economic growth. The abnormal increase in credit supply increases real GDP growth. The abnormal increase in credit supply decreases real GDP per capita during the global financial crisis. The abnormal increase in domestic credit to private sector has a significant positive effect on GDP per capita when there is strong legal system quality in Nigeria. In contrast, the abnormal increase in domestic credit to private sector has a significant negative effect on real GDP growth when there isstrong legal system quality in Nigeria. The abnormal increase in credit supply is ineffective in increasing GDP per capita during crisis years. Policymakers should be cautious in pressuring financial institutions to release an abnormally large amount of credit into the economy particularly during financial crises. Rather, policymakers should encourage financial institutions to supply credit in a sustained manner – not in an abnormal manner – and in a way that supports growth.
... Further, another issue can arise in panel data analysis: heteroscedasticity. Therefore, to avoid endogeneity and heteroscedasticity problems, we used the GMM model developed by Hansen (1982) to estimate equations. ...
Research
Full-text available
This paper revisits the corporate governance role in persuading non-financial firms' investment pronouncements listed on the Pakistan Stock Exchange (PSX). Since Pakistan Corporate Governance Code was revised in 2012, the impact of change due to the revision of the code is also analyzed. The results of the study provide interesting insights. We found that the corporate governance code 2012 diminishes investment inefficiency. The family-owned businesses have an incentives alignment effect by decreasing inefficient investments. However, post-code period results show that stringent monitoring mechanisms of code decrease the family managers' initiatives to undertake projects. The resource provisioning function of the independent board in decreasing inefficient investment is identified when combined with improved governance code standards. Independent directors of the audit committee diminish inefficient investments. However, the supervision effect of independent audit committee directors is eliminated in the post-code 2012 period. Asset side accruals quality reduces investment inefficiency. However, against our expectations, liability side accruals quality increases investment inefficiency. We further observed that the corporate governance code 2012 incrementally linked with accrual quality and investment inefficiency.
... Based on this observation, we can check the validity of moment conditions in (16)-(17) to examine the adequacy of the log-SHE model. This testing idea is the same as that of the overidentification test in Sargan (1958) and Hansen (1982); see also Lee (2007), Sun and Kim (2012), Dovonon and Gonçalves (2017), and Jin and Lee (2019) for more studies in this aspect. ...
Preprint
The spatial dependence in mean has been well studied by plenty of models in a large strand of literature, however, the investigation of spatial dependence in variance is lagging significantly behind. The existing models for the spatial dependence in variance are scarce, with neither probabilistic structure nor statistical inference procedure being explored. To circumvent this deficiency, this paper proposes a new generalized logarithmic spatial heteroscedasticity model with exogenous variables (denoted by the log-SHE model) to study the spatial dependence in variance. For the log-SHE model, its spatial near-epoch dependence (NED) property is investigated, and a systematic statistical inference procedure is provided, including the maximum likelihood and generalized method of moments estimators, the Wald, Lagrange multiplier and likelihood-ratio-type D tests for model parameter constraints, and the overidentification test for the model diagnostic checking. Using the tool of spatial NED, the asymptotics of all proposed estimators and tests are established under regular conditions. The usefulness of the proposed methodology is illustrated by simulation results and a real data example on the house selling price.
... Based on this observation, we can check the validity of moment conditions in (16)-(17) to examine the adequacy of the log-SHE model. This testing idea is the same as that of the overidentification test in Sargan (1958) and Hansen (1982); see also Lee (2007), Sun and Kim (2012), Dovonon and Gonçalves (2017), and Jin and Lee (2019) for more studies in this aspect. ...
Article
Full-text available
The spatial dependence in mean has been well studied by plenty of models in a large strand of literature, however, the investigation of spatial dependence in variance is lagging significantly behind. The existing models for the spatial dependence in variance are scarce, with neither probabilistic structure nor statistical inference procedure being explored. To circumvent this deficiency, this paper proposes a new generalized logarithmic spatial heteroscedasticity model with exogenous variables (denoted by the log-SHE model) to study the spatial dependence in variance. For the log-SHE model, its spatial near-epoch dependence (NED) property is investigated, and a systematic statistical inference procedure is provided, including the maximum likelihood and generalized method of moments estimators, the Wald, Lagrange multiplier and likelihood-ratio-type D tests for model parameter constraints, and the overidentification test for the model diagnostic checking. Using the tool of spatial NED, the asymptotics of all proposed estimators and tests are established under regular conditions. The usefulness of the proposed methodology is illustrated by simulation results and a real data example on the house selling price.
... The reason we chose 2005 is that there are insufficient data for the variable environmental sustainability policies and institutions prior to 2005, so we chose 2005 as the baseline year for all variables because this variable is critical to this study. The data for the variables used in this study, CO emissions, overexploitation of natural resources and forest reserves, environmental sustainability policies and institutions, foreign direct investment, domestic investment, international tourism, trade openness, economic growth, and urbanization, were collected from the World Bank following [32][33][34][35][36]. The following Table 1 provides a brief description of the variables used in this study. ...
Article
Full-text available
Persistent drought is not a unique phenomenon in East African countries, different research findings cite different reasons for it, but the environmental problem is currently a major concern worldwide and in East African country (EAC) the problem is not an exception to this phenomenon; policymakers and researchers are interested in knowing the cause in order to mitigate environmental degradation and support policies and institutions for environmental sustainability. Therefore, this study examines the environmental sustainability laws and institutions in 18 EAC to determine the relationship between foreign direct investment and environmental quality. Using the generalized method of moments for analysis, the results show, among other things, that foreign direct investment, when associated with environmental sustainability policies and institutions, improves environmental quality in the long run while degrading it in the short run. Long- and short-run environmental improvements in EAC are also enabled by domestic investment, environmental sustainability institutions, and policies. The study, therefore, concludes that environmental sustainability institutions and policies are critical in EAC because they improve environmental quality and interact with foreign direct investment in the long run. Therefore, the study recommends that policymakers and other stakeholders in EAC take action to improve environmental quality and sustainable economies.
... We apply the VAR panel model selection procedure developed by Abrigo and Love (2016). The model selection method calculates the coefficient of determination of the overall model, Hansen's statistic (Hansen, (1982) in Lee (2014), and the corresponding p-value. The model selection criterias are all based on the J Hansen statistic. ...
Article
Full-text available
The direction of globalization and the integration of the financial system continue to increase, in line with the increasing capital flows, which is the focus of discussion in this research. This study applies panel data analysis to analyze banking behavior in order to improve its performance. The analysis uses panel data from 1991 to 2020 in 39 countries. Return on Equity (ROE) as a measure of the success of banking operations is determined by various interrelated factors. One of the variables closely related to banking performance is the share of non-financial business loans, the share of capital inflows entering the banking sector, and the share of capital inflows entering the non-bank sector. Economic variables that support good banking performance are GDP growth, bank concentration, inflation, leverage, and bank efficiency. This article applies a Panel Vector Autoregressive to capture the dynamization, and heterogeneity. The most exciting results were obtained by dividing the sample into subgroups, which helped the researcher understand each regime's different roles and transmissions. The changes in capital inflows to the non-bank sector will significantly reduce ROE and increase leverage for the next five periods. The results of the study imply that nowadays, bank managers should be aware while the changes in capital inflows change very quickly. Bank managers in countries with high capital inflows must always be aware of changes in capital inflows to the non-bank sector—steps to bank management by diversifying sources of funds efficiently from other parties in the transmission of credit channel.
... The twostep SGMM estimator employs an optimal weighting matrix for the moment conditions. To satisfy the consistency of the GMM estimator, we use the Arellano-Bond AR (1) and AR (2) tests of the serial correlation properties and the Hansen [85] J-test of over-identifying restrictions. By using this, we validate the assumption that lagged values of the explanatory variables are valid instruments. ...
Article
Full-text available
The paper focuses on the impact of food aid and governance quality (the latter disaggregated in different components) on both food and nutrition security in the SSA region and for a sample of 25 countries over the period 1996 to 2018. The main novelty and contribution of the paper in the relevant literature is by providing macro-level evidence in the SSA region to complement country-specific evidence in this research area. We also use different food and nutrition security outcome measures, which include the average value of food production, average dietary energy supply adequacy, and prevalence of undernourishment. Furthermore, we combine the above with the use of both aggregated and disaggregated governance indicators to examine the impact of governance quality on the outcome variables. We find evidence of a robust relationship between food aid, governance quality, and food and nutrition security outcomes by employing the GMM estimator. We also find that food aid increases food and nutrition security while it reduces undernourishment. Among the various governance quality indicators we have employed, the control of corruption and political stability show a significant relationship with the measured outcomes. However, the composite governance index and food aid jointly have no significant effect on food security, but they significantly increase nutrition security and reduce undernourishment across the various empirical models we have employed in our empirical analysis. An important policy lesson emanating from our empirical findings is that controlling corruption and maintaining political stability may have significant implications for enhancing the impact of food aid on food and nutrition security in the region.
... We estimate the demand using the standard procedure for the BLP-type model. The estimation algorithm is a nested fixed point (NFP) algorithm (Berry, Levinsohn, and Pakes, 1995), which roughly includes two loops-an inner, contract-mapping loop to infer mean utility, δ , and an outer loop for nonlinear GMM estimation (Hansen, 1982)-to obtain the parameter matrix θ θ θ 2 . (See Berry, Levinsohn, and Pakes, 1995;Nevo, 2001, for a detailed description.) ...
Article
Berkeley's sugar tax policy is currently under intense scrutiny and debate, while similar tax policies are rapidly expanding to other U.S. states. Contrary to theoretical predictions and policy expectations, previous literature documents short-term evidence of increased consumption of sugary drinks in response to a sugar tax policy. We investigate the underlying mechanism behind this behavioral anomaly using the Berry, Levinsohn, and Pakes (BLP) random coefficient (RC) logit demand model in characteristic space. We find that the consumption increase is mainly driven by a change in the average valuation of the sugar content going from negative to positive following enactment of the sugar tax policy.
... Thanks to the generalization of the method of moments, the problem of heteroscedasticity of the residual component is also solved with the two-step corrected model. The method itself was originally constructed in their work by Andersen and Hsiao (1981) and subsequently by Hansen (1982). However, Arellano and Bond (1991) also contributed to its development and pointed out the problem of serial correlation across the idiosyncratic errors, which can be understood as a panel residual component. ...
Preprint
Full-text available
Despite interest in financial management, few studies have considered paying attention to the ownership structure among stockholders. Two alternative approaches related to the ownership structure are generally regarded as the leading cause of different management behaviours. First, managers should be less controlled in the case of less concentrated ownership with many owners, and thus could be more willing to not cooperate in the interests of owners. Second, vice versa, the less concentrated ownership structure causes the more pronounced control of management, and hence the pressure on its functioning. The results of this paper have proven the second approach in one country and just suggested the first among two different countries belonging to the EU leaders within the automotive industry. Furthermore, this study reveals that, without deploying techniques, subsequently introduced a modified version of GMM estimators with panel data by providing an implementation using Stata statistical software. Otherwise, these particular econometric tools to analyse a dynamic panel can often give false significant estimates. JEL classification:C58, D25, E21, G39
... This research applied the general dynamic GMM assuming (a) some regressors may be determined endogenously, (b) past value influences current value, (c) uncorrelation of the idiosyncratic shock across N, (d) T may be small, and (e) some regressors are not strictly exogenous. This research also used some diagnostic tests to confirm its reliability like (a) serial correlation test to confirm the absence of serial correlation (i.e., first and second-order serial correlations) [114] (b) the Sargan test to check the overall validity of the instruments, and (c) the Hansen [117] test to check instrument validity [7]. Table 3 reveals the summary statistics of variables in four income groups (see Appendix A). ...
Article
Full-text available
Natural disasters do occur and have become a global problem due to increasing intensity. Developing countries are mostly affected due to natural disasters owing to a poor environment, feeble adaptation, impoverished socioeconomic conditions, poor infrastructure, limited resources, and unstable institutions. The SDG 11.5 target which highlights the mitigation of loss due to natural disasters––remains crucial to achieving sustainable cities and human settlements––but the literature is limited on this scope. Thus, this research contributes to the literature by incorporating an infrastructure index, foreign direct investment (FDI), human capital index, globalization, and capital formation into the disaster-growth debate across four-income groups in 98 countries from 1995 to 2019. We developed infrastructure and human capital indices using a standard procedure across all income groups. The two-step generalized method of moments employed herein confirmed the income reduction effect of natural disasters. While the economic cost of natural disasters is relatively high in low-income countries and mild in high- and upper-middle-income countries. Besides, infrastructural development, FDI, human capital, globalization, and gross fixed capital formation also affect economic growth across income groups. Thus, the enhancement of socio-economic policies could decline economic losses, especially in vulnerable and poor settlements in developing countries.
... We applied the GMM approach because the ordinary least squares (OLS) regression methodology does not address the problem of endogeneity that occurs when the independent variables are correlated with the error term. To address this problem and obtain reliable estimates, we use the Generalized Method of Moments (GMM) introduced by Hansen (1982). The GMM model also controls for autocorrelation and heteroskedasticity of unknown form (Musa et al, 2021). ...
Article
Full-text available
This paper investigates the effect of abnormal increase in credit supply on economic growth in Nigeria after controlling for the quality of the legal system, size of central bank asset, banking sector cost efficiency and bank insolvency risk. We employ the GMM regression methodology to estimate the effect of abnormal increase in credit supply on two measures of economic growth in Nigeria. We find that abnormal increase in credit supply has a significant effect on economic growth. Abnormal increase in credit supply increases real GDP growth. Abnormal increase in credit supply decreases real GDP per capita during the global financial crisis. Abnormal increase in domestic credit to private sector has a significant positive effect on GDP per capita when there is strong legal system quality in Nigeria. In contrast, abnormal increase in domestic credit to private sector has a significant negative effect on real GDP growth when there is strong legal system quality in Nigeria.
... As shown in the Table, we reject the null hypothesis of no cross-sectional dependence based on Frees and Friedman cross-sectional dependence tests in all of the models. However, based on Pesaran cross-sectional dependence test, we can only reject the null hypothesis of cross-sectional independence only in model 4. Hansen's (1982) J-statistical test for over-identifying restrictions. Based on the coefficient of determination, the optimal lag length that minimises the three aforementioned criteria is the right lag length to be used for conducting the panel VAR Granger causality test. ...
Preprint
This study adopted a novel quantile regression via moments to explore the effects of military spending on the distribution of economic growth of 14 MENA countries over the period from 1981 to 2019. The method, apart from enabling us to investigate the effects of military spending on the distribution of economic growth at different quantiles, also helps to address issues of heterogeneity and endogeneity characterising the panel studies. Our results showed that irrespective of measures of military spending and economic growth, an upsurge in military spending leads to a positive effect on economic growth at different quantiles, suggesting that military spending is productive and growth-enhancing in the MENA countries
... Bu çalışmada 30 numaralı model, Hansen (1982) Öncelikle modelde kullanılan değişkenlerin birim kök taşıyıp taşımadığı nı tespit edebilmek için Genişletilmiş Dickey-Fuller (ADF) testi ve kırılmaların içsel olduğunu kabul eden Zivot Andrews (ZA) testi yapılmıştır. ZA testine göre ise tüm değişkenler durağan bulunmuşken ADF testine göre kapasite kullanım oranı dışında tüm değişkenler durağan bulunmuştur (EK 5A-5B). ...
Article
Full-text available
Output gap is defined as the difference between the potential output and actual output. There are several approaches used in the literature to estimate output gap. With this study it is aimed to obtain alternative output gap estimations for Turkish Economy, considering the constraints of approaches that are used in the literature. With this aim, output gap is estimated using two methods such as (1) Structural VAR (Sutructural Vector Autoregressive Model-SVAR) approach proposed in Blanchard and Quah (1989), and (2) Modified Hodrick Prescott Filter based on ARIMA model proposed in Kaiser ve Maravall (2005). These methods are compared to the most frequently used HP filter method in the literature. The output gap estimations are compared in terms of their actual inflation prediction power considering that output gap estimation is an essential input in structuring price stability policy. As a result it can be asserted that output gap estimated by SVAR method produces more successful results in predicting actual inflation. Özet: Çıktı açığı, üretimin fiili ve potansiyel seviyeleri arasındaki fark olarak tanımlanmaktadır. Yazında çıktı açığının tahmininde kullanılan çeşitli yaklaşımlar bulunmaktadır. Bu çalışmada yazındaki yöntemlerin kısıtlarını da göz önünde bulundurarak Türkiye ekonomisi için alternatif çıktı açığı tahminleri elde edilmesi amaçlanmıştır. Bu amaçla (1) Türkiye ekonomisi için Blanchard ve Quah (1989) tarafından önerilen Yapısal VAR (SVAR) modeli, (2) Kaiser ve Maravall (2005) tarafından önerilen ARIMA modeline dayalı "Uyarlanmış Hodrick-Prescott filtresi" (Modified HP) yöntemleriyle çıktı açığı tahmin edilmiştir. Bu yöntemler yazında en çok kullanılan HP filtresi yöntemiyle karşılaştırılmıştır. Çalışmada çıktı açığı tahmininin fiyat istikrarı politikası oluşturulmasında çok önemli bir girdi olduğu göz önünde bulundurularak elde edilen çıktı açığı tahminleri, gerçekleşen enflasyonu açıklama güçleri açısından karşılaştırılmıştır. Ampirik bulgularımız SVAR yöntemiyle tahmin edilen çıktı açığının cari enflasyonu açıklamakta daha başarılı sonuçlar ürettiği yönündedir.
... The adoption of internal instruments to address the endogeneity issue due to the reverse causality between exports and the rule of law could raise some concerns about the adequacy of the SYS-GMM estimator. However, we verified the validity of all moment conditions (by implementing Hansen's (1982) J test of over-identifying restrictions, which resulted in being not statistically significant), and the absence of second-order autocorrelation is confirmed (by adopting the Arellano and Bond test, which resulted in being not statistically significant as well), the SYS-GMM proves to be a suitable method for a dynamic panel model (Granato et al., 2015). ...
Article
Our article presents an empirical investigation of the relationship between the export performance of Italian provinces and the quality of their local institutions, specifically the rule of law, over the period 2004–2016. According to the results obtained by different econometric approaches (OLS, FE, SYS-GMM), in general a secure and well-defined legal framework – by reducing transaction costs and uncertainty, facilitating capital accumulation and an increase in the firms' scale of production – is associated with better export performance. Interestingly, when the analysis is replicated at the level of the Italian macro-areas (North, Centre and South), the results indicate that the rule of law has a statistically significant and positive association with export performance only in northern provinces, thus suggesting that the effectiveness of this institutional dimension might depend on the level of development of the socioeconomic and institutional features at the local level, i.e. only when a set of suitable economic incentive mechanisms are already in place.
... Further, another issue can arise in panel data analysis: heteroscedasticity. Therefore, to avoid endogeneity and heteroscedasticity problems, we used the GMM model developed by Hansen (1982) to estimate equations. ...
Article
Full-text available
This paper revisits the corporate governance role in persuading non-financial firms' investment pronouncements listed on the Pakistan Stock Exchange (PSX). Since Pakistan Corporate Governance Code was revised in 2012, the impact of change due to the revision of the code is also analyzed. The results of the study provide interesting insights. We found that the corporate governance code 2012 diminishes investment inefficiency. The family-owned businesses have an incentives alignment effect by decreasing inefficient investments. However, post-code period results show that stringent monitoring mechanisms of code decrease the family managers' initiatives to undertake projects. The resource provisioning function of the independent board in decreasing inefficient investment is identified when combined with improved governance code standards. Independent directors of the audit committee diminish inefficient investments. However, the supervision effect of independent audit committee directors is eliminated in the post-code 2012 period. Asset side accruals quality reduces investment inefficiency. However, against our expectations, liability side accruals quality increases investment inefficiency. We further observed that the corporate governance code 2012 incrementally linked with accrual quality and investment inefficiency.
... with respect to Θ, using the optimal weighting matrix Ω −1 which corresponds the inverse of the covariance of h i (Hansen, 1982), hence that of ∆AT T . Let us rewrite this problem as ...
Preprint
Full-text available
This paper studies the identification, estimation, and inference of long-term (binary) treatment effect parameters when balanced panel data is not available, or consists of only a subset of the available data. We develop a new estimator: the chained difference-in-differences, which leverages the overlapping structure of many unbalanced panel data sets. This approach consists in efficiently aggregating a collection of short-term treatment effects estimated on multiple incomplete panels. Our estimator accommodates (1) multiple time periods, (2) variation in treatment timing, (3) treatment effect heterogeneity, and (4) general missing data patterns. We establish the asymptotic properties of the proposed estimator and discuss identification and efficiency gains in comparison to existing methods. Finally, we illustrate its relevance through (i) numerical simulations, and (ii) an application about the effects of an innovation policy in France.
... 3.3.2.1 Première étape : estimation du SUR par la méthode des moments gé- Hansen (1982) et de Sargan (1958) pour valider la spécification et l'ensemble d'instruments utilisé. Après la caractérisation de la technologie de production par l'estimation du système de demandes conditionnelles de facteurs de production variables, nous récupérons les résidus ✏ 1it ,...,✏ Git qui vont servir comme variables à expliquer à la deuxième étape d'estimation. ...
Thesis
Cette thèse étudie la performance des hôpitaux Québécois en utilisant une approche par le coût de production. La thèse est constituée de quatre chapitres. Le premier chapitre propose un modèle théorique permettant de décomposer l’inefficacité des unités de production entre l’inefficacité technique et l’inefficacité allocative. Le deuxième chapitre décrit la base de données sur les hôpitaux Québécois pour la période 1981 à 2009 en présentant les facteurs de production et les services de santé réalisés par les hôpitaux. Le troisième chapitre développe une méthode d’estimation prenant en compte l’hétérogénéité des unités de production et propose une décomposition originale de l’inefficacité dans le cadre de données de panel. La méthode d’estimation repose sur trois étapes d’estimation. La première étape consiste à estimer le système de demandes conditionnelles de facteurs de production par la Méthode des Moments Généralisée (MMG) pour tenir compte de l’endogénéité. La deuxième étape permet d’estimer l’inefficacité technique variante dans le temps en adaptant la méthodologie développée par Cornwell et al. (1990) pour la rendre opérationnelle dans le cadre d’un système. La troisième étape estime l’hétérogénéité observée et inobservée ainsi que l’inefficacité allocative en tenant compte du caractère non cylindré des panels. Enfin, le dernier chapitre présente une application empirique sur les hôpitaux Québécois pour la période 1981 à 2009. Les résultats donnent des indications sur la gestion des ressources au niveau hospitalier afin d’améliorer l’efficacité des hôpitaux.
... A possible solution to this problem consists in using the Arellano and Bond (1991;1998) estimator which uses moment conditions in which lags of the dependent variable and first differences of the exogenous variables are instruments for the first-differenced equation. The Arellano-Bover/Blundell-Bond GMM estimator (Arellano & Bover, 1995;Blundell & Bond, 1998;Hansen, 1982) augments Arellano-Bond by assuming that first differences of instrument variables are uncorrelated with the fixed effects. This allows for the introduction of more instruments, thereby considerably improving efficiency. ...
Article
Full-text available
This paper explores the link between globalization and internal mobility in Vietnam. We find that Vietnam’s internationalization processes have an asymmetric economic impact on the provinces. Using data on inter-provincial migration flows, we show that this asymmetry is also detectable in terms of differences in the levels of provincial attraction vis-à-vis internal migration. In particular, provinces receiving higher foreign direct investment are found to be the most attractive for internal migrants. The existence of a pull-through effect associated with migrant networks also emerges in our findings. Overall, the results corroborate the idea that globalization processes are key determinants of internal migration flows.
... The first-stage equation and the GMM moment condition for endogenous variable set W it is shown in Eq. (3). This is estimated via two-step feasible Generalized Method of Moments (GMM) procedure proposed by Hansen (1982). The two-step estimator first estimates the system of equations defined by Eq. (1) and (3) using an identity weighting matrix. ...
Article
Non-face (NF) emojis are increasingly used to complement or substitute words in digital marketing messages, yet the effects, mechanisms, and contingencies of this communication strategy remain underexplored. In a large-scale longitudinal study of Airbnb listings, we show that NF emojis (vs. simple text) lead to an increase in eWOM volume, an effect we replicate experimentally. This effect is qualified by important boundary conditions whose underlying mechanisms are investigated in two additional experimental studies. At the message level, using multiple substitutive (vs. complementary) NF emojis reduces message evaluations and eWOM volume due to reduced processing fluency. At the source level, seller quality further moderates the interaction between emoji function and emoji number: for premium sellers, using multiple NF emojis reduces message evaluations and eWOM volume irrespective of their function due to reduced perceptions of competence. We distill these findings into detailed managerial guidelines for using NF emojis in digital marketing.
... The Sargan/ Hansen test for overidentifying restrictions and the second-order serial correlation test AR (2) test were initially carried out to assess the issue of endogeneity and the validity of the instruments. The GMM system technique was used to apply the Sargan and Hansen test of overidentifying restrictions as suggested by Arellano and Bond (1991) and Hansen (1982). Given that the probability values for the Sagan/Hansen test and the AR (2) test were not significant at 5%, confirm that there was no second-order serial correlation. ...
Article
Full-text available
This study investigates the moderating effect of institutional quality on the relationship between foreign capital flow and human capital development in sub-Saharan Africa. The study uses a sample of 34 countries in sub-Saharan Africa and data for 2009 to 2019. Human capital development is measured using the Human Development Index (HDI). To control for endogeneity, the study uses the system generalized method of moments (GMM) estimator. The results demonstrate a positive relationship between remittances, foreign direct investment (FDI), institutional quality and human capital development. Official development assistance (ODA), on the other hand, has a negative and significant effect on human capital development. The findings further reveal that the effect of remittances and FDI on the human capital development is moderated by the institution's quality. However, the effect of ODA on the development of human capital is not influenced by institutional quality. Findings from the study provide valuable insights to policy-makers. This study highlights the importance of remittances and FDI in stimulating human capital development in sub-Saharan Africa. Additionally, the study reveals the harmful impact of official development on human capital development that necessitates policy interventions. Drawing on these findings, policymakers should undertake policy reforms to improve the quality of institutions and enhance the impact of foreign capital flows on human development. This study offers two contributions. First, the study fills a vacuum in the literature by focusing on the relationship between foreign capital flow, institutional quality, and the development of human capital in sub-Saharan Africa. Second, the SSA is one of the developing nations that has seen a significant brain drain because of widespread migration to industrialized nations. Therefore, it is necessary to investigate how much foreign capital flows through the development of human capital contribute to the socioeconomic change of the region.
Article
Businesses' alignment with the United Nations' Sustainable Development Goals (SDGs) is enthusiastically highlighted in practitioner and academic literature. However, based on the existing evidence, it is still debatable whether the adoption of SDGs correlates with firm performance, especially in developing countries. Using Association of Southeast Asian Nations (ASEAN) manufacturing firms as a case study, we investigate the effects of businesses in developing countries aligning themselves with the SDGs might affect productivity and efficiency. Using 3471 firm‐level data from the World Bank's Enterprise Survey, our results reveal that aligning business strategies with the United Nations' SDGs helps promote productivity and efficiency. Paying higher wages (SDG 8) and promoting skills development (SDG4) can significantly boost productivity and efficiency. Investment in market innovation (SDG9), fostering foreign direct investment (SDGs 5–9), and adopting ISO certifications (SDGs 1–9 and 12–15) help firms increase their productivity and efficiency as well. Although a higher proportion of female workers correlate with reduced productivity and efficiency, supporting female workers with higher skills development (SDGs 4 and 5) and female CEOs (SDG 5) can increase productivity and efficiency. Therefore, policymakers in developing countries should provide supports and incentives for businesses to align their business strategies with the SDGs.
Article
Despite having a GDP growth rate above the EU-15 average, labor market conditions in some Central and Eastern European countries (CEECs) remain problematic. In particular, unemployment rates have been slow to approach the European average, and the labor-force participation rate remains below European standards. This non-employment is all the more problematic given that regional heterogeneities in the EU have been increasing over time. We use the approach of Blanchard and Katz [1992] in order to understand how the unemployment rate and the participation rate respond, at the regional level, when an employment shock occurs. We find that across the EU-28 there is an effective labor supply adjustment, with a short-run and temporary response of the unemployment and participation rates. We find no significant differences between the EU-15 and CEE regions and conclude that labor market conditions are converging within the EU as a whole. However, with respect to the overall employment structure, we highlight the role of the sectoral reallocation of labor in increasing labor market flexibility. Finally, we highlight the higher sensitivity of women’s participation to employment shocks. JEL codes : C33, J21, E24
Preprint
Full-text available
Green innovation is a critical support to combat climate change arising from greenhouse gas emissions generated by energy consumption. It is an essential way to achieve resource storage, carbon emissions reduction, and sustainable development goals in China. Based on an environmental framework defined as the Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model, this study aimed to empirically check the impact of green innovation (GI), per capita GDP (PGDP), population density (PD), environmental regulations (ER), energy consumption (EC), and industrial structure upgrading (ISU) on CO 2 emissions (CO 2e ). For this purpose, a sample dataset covering the 30 provincial regions in mainland China from 2005 to 2019 was analyzed using the Fixed Effects and System Generalized Method of Moment (SYS-GMM) Methodology. The empirical results showed that CO 2e in the current period were further aggravated due to the agglomeration effect of CO 2e from the previous period. The data analysis indicated that GI, ER, and ISU all exert a significant inhibitory effect on CO 2e , whereas PGDP, PD, and EC had a positive effect on carbon emissions when dynamic relationships were analyzed. In the regional heterogeneity test, the current model also revealed that the impact of GI on diminishing CO 2e was more pronounced in the east-central region, but not in the west. It is suggested that policymakers in China not only design differentiated policies in response to regional heterogeneity, but also focus on the decisive role of green technology application, environmental protection, and green transformation of industrial structure in curbing CO 2e .
Article
Full-text available
This paper examines how fiscal transparency is linked to bank development. It also hypothesizes that the effect is mediated by reasonable channel(s). Drawing upon a panel dataset of emerging and developing economies, we find that fiscal transparency is positively related to the private credit and to the ratio of liquid assets, implying that more transparent policies enhance bank development. Our panel regressions and the mediation analysis also suggest that the effect of fiscal transparency on private credit is significantly transmitted through the control of corruption, while it has a direct effect on the ratio of liquid assets.
Article
Prior research has identified outward‐oriented policies as a far superior approach to achieving economic growth. Whilst trade openness determines economic growth in the short run, institutional quality is critical to long‐term viability. However, the direct and indirect effects of institutions have been understudied, particularly for the Brazil, Russia, India, China and South Africa. This study addresses this issue by estimating long‐run and short‐run elasticities using the system GMM and pooled mean group models and identifying its country‐specific impact using the fully modified ordinary least square model. According to the findings, trade and institutions are only short‐run complements of economic growth. In the long run, however, the lack of good governance limits the positive impact of trade openness.
Article
We revisit the link between interest rates and corporate bond credit spreads by applying Rigobon’s (2003) unique heteroskedasticity-based identification methodology to their interconnected dynamics through a bivariate VAR system. This different approach allows us to account for simultaneity issues and use this framework to test the various possible explanations for the credit spread – interest rate relation that have been proposed by the literature over the years. We find that credit spreads do indeed respond negatively to interest rates, a result consistent with Merton’s (1974) structural model. This negative relation is robust to macroeconomic shocks, market uncertainty, business cycles, different sample periods, bond callability, and bond ratings. We also find the magnitude of the negative relation to be larger for high-yield bonds than for investment-grade bonds, and are able to rule out the option-like feature of callable bonds proposed by Duffee (1998 Duffee, G. R. 1998. “The Relation Between Treasury Yields and Corporate Bond Yield Spreads.” The Journal of Finance 53: 2225–2241. doi:10.1111/0022-1082.00089.[Crossref], [Web of Science ®] , [Google Scholar]) as the main driver of the negative nature of the relationship. These results have important portfolio and risk management implications.
Article
This study investigates the institutional quality effects on the foreign direct investment (FDI)–regional integration nexus in the Community of Sahel-Saharan States (CEN-SAD). The novelty of our approach extends the regional integration theory in Africa by employing the Africa Regional Integration Index (ARII) and utilizes a dynamic panel data model based on the one-step system generalized method of moments (SYS-GMM) estimation to explore the institutional quality effects on the relationship between FDI location advantages and inflows and dimensions of regional integration. Our study highlights macroeconomic integration as the strongest indicator of regional integration as well as the most crucial determinant of FDI in CEN-SAD. We also discovered that FDI inflows into the lower-middle income countries (LMICs) were only slightly higher than in low-income countries (LICs). Our results infer that institutional reforms augment FDI location advantages and enhance FDI inflows irrespective of the level of integration in the Community.
Article
This paper proposes a robust moment selection method aiming to pick the best model even if this is a moment condition model with mixed identification strength, that is, moment conditions including moment functions that are local to zero uniformly over the parameter set. We show that the relevant moment selection procedure of Hall et al. (2007, Journal of Econometrics 138, 488–512) is inconsistent in this setting as it does not explicitly account for the rate of convergence of parameter estimation of the candidate models which may vary. We introduce a new moment selection procedure based on a criterion that automatically accounts for both the convergence rate of the candidate model’s parameter estimate and the entropy of the estimator’s asymptotic distribution. The benchmark estimator that we consider is the two-step efficient generalized method of moments estimator, which is known to be efficient in this framework as well. A family of penalization functions is introduced that guarantees the consistency of the selection procedure. The finite-sample performance of the proposed method is assessed through Monte Carlo simulations.
Article
This article is devoted to evaluating the role of intangible assets in the process of increasing the value of a company. As a sample, we have chosen FMCG companies around the world. The research was done on 90 FMCG companies. The theoretical part presents the “Value Creation Mixer” model that allows visual identification and determines the role of this type of asset in creating company value. This study reveals that the majority of FMCG companies are undervalued in terms of the value of intangible assets by comparing the market value of intangible assets with the fundamental and theoretical value. Our empirical findings support the positive impact of intangible assets on companies’ value based on a dynamic panel approach. The policy implications suggest managers protect intangible assets intending to maximize the value of the fast-moving consumer goods companies.
Article
Full-text available
Objective: Previous research has documented a positive effect of leisure-time physical activity (LTPA) on life satisfaction. The relationship between physical activity and the specific domain of job satisfaction is, however, relatively unknown. This study aims to investigate the effects of different frequency levels of LTPA on self-reported job satisfaction and specifically focuses on the two mechanisms of health and recovery from work stress. Methods: Using data from the German Socio-Economic Panel (2001-2019), fixed effects and dynamic panel data regression models are estimated to address the problems of unobserved heterogeneity and reverse causality. A mediation and sub-sample analysis shed light on the role of health and work stress. Results: The results reveal that weekly LTPA has a positive effect on job satisfaction and that health represents a channel yielding those benefits. The effect appears to be moderated by work stress. Further, the analysis reveals the importance of considering unobserved heterogeneity and reverse causality when studying this relationship. Conclusion: The findings indicate a positive relationship between regular LTPA and job satisfaction and add plausible causal evidence to the limited literature in this context. The findings yield implications for employers and employees. KEYWORDS dynamic panel estimator, job satisfaction, physical activity, public health
Article
Does Subjective Evaluation of Probability Impact Asset Prices? The Nobel Prize–winning capital asset pricing model (CAPM) predicts that expected excess return of any asset is positively proportional to its exposure to the overall market: the beta, leading to an upward-sloping security market line. However, this prediction is contradicted by empirical studies that the return–beta slope is often flat or even downward-sloping, a puzzle called the “beta anomaly.” The CAPM is premised upon the notion that market participants are all rational, including that they are able to objectively evaluate probabilities. However, evidence abounds that individuals are often unable to do so, examples being purchase of lottery tickets and insurance products, in which the extremely small probabilities of winning or losing big are exaggerated. This phenomenon of distorting probabilities at both tails is called “probability weighting” (PW), which is a key component of modern behavioral finance. The paper “Beta and Coskewness Pricing: Perspective from Probability Weighting” approaches the beta anomaly through PW. It offers an explanation of the beta anomaly via a new theoretical CAPM involving PW and an extensive empirical study.
Article
There has been a growing interest in incorporating auxiliary summary information from external studies into the analysis of internal individual‐level data. In this paper, we propose an adaptive estimation procedure for an additive risk model to integrate auxiliary subgroup survival information via a penalized method of moments technique. Our approach can accommodate information from heterogeneous data. Parameters to quantify the magnitude of potential incomparability between internal data and external auxiliary information are introduced in our framework while nonzero components of these parameters suggest a violation of the homogeneity assumption. We further develop an efficient computational algorithm to solve the numerical optimization problem by profiling out the nuisance parameters. In an asymptotic sense, our method can be as efficient as if all the incomparable auxiliary information is accurately acknowledged and has been automatically excluded from consideration. The asymptotic normality of the proposed estimator of the regression coefficients is established, with an explicit formula for the asymptotic variance‐covariance matrix that can be consistently estimated from the data. Simulation studies show that the proposed method yields a substantial gain in statistical efficiency over the conventional method using the internal data only, and reduces estimation biases when the given auxiliary survival information is incomparable. We illustrate the proposed method with a lung cancer survival study.
Article
This paper examines the relationship between capital expenditure and firm value in the MENA region, and the moderating role that market competition and information asymmetry play in this relationship. The study consists of 3,930 observations that include yearly data from the 2010–2019 period. Empirical tests show that in markets of high product competition, capital expenditure exerts a negative effect on firm value, while under the condition of high information asymmetry, this effect is positive. The results also suggest that the hypothesized relationships are stronger for small-sized firms and for Shariah-non-compliant companies.
Chapter
Lars Peter Hansen is the David Rockefeller Distinguished Service Professor of Economics at the University of Chicago. His research spans econometrics, macroeconomics, asset pricing, and decision theory and focuses on quantitative implications of decision-making under uncertainty for macroeconomic dynamics, valuation, and economic policy. His contributions to econometrics facilitated formal study of testable implications of economic models, his work on asset pricing laid some of the foundations of a field that is now called macro-finance, while his analysis of ways that econometricians and economic agents cope with uncertainty and potential model misspecification opened new directions for building empirically relevant models in macroeconomics and finance. Hansen received his PhD from the University of Minnesota in 1978, and his wide-ranging contributions were rewarded in 2013 with the Nobel Memorial Prize in Economic Sciences.
Article
Full-text available
Particularly under the assumption of rational expectations, a model may have serially correlated errors and those errors may be uncorrelated with contemporaneous and lagged values of a predetermined instrument, yet the instruments may not be strictly exogenous. This paper proposes a method for transforming such a model to one without serial correlation, while keeping the instrument predetermined. Standard theory of instrumental variables estimation then applies. Furthermore, it turns out that for transformations of the class proposed, asymptotic distribution theory is the same whether the serial correlation properties of the errors are known a priori or estimated. As the number of lagged values of the predetermined variables used as instruments increases, the asymptotic variance of the standard instrumental variables estimator applied to the transformed model approaches that of the optimal estimator proposed by Hansen and Sargent [8].
Article
which the relationships are not exact, so that a set of ideal economic variables is assumed to be generated by a set of dynamic stochastic relationships, as in Koopmans [12], and the actual economic time series are assumed to differ from the ideal economic variables because of random disturbances or measurement errors. The asymptotic error variance matrix for the coefficients of one of the relationships is obtained in the case in which these relationships are estimated using instrumental variables. With this variance matrix we are able to discuss the problem of choice that arises when there are more instrumental variables available than the minimum number required to enable the method to be used. A method of estimation is derived which involves a characteristic equation already considered by Hotelling in defining the canonical correlation [10]. This method was previously suggested by Durbin [7]. The same estimates would be obtained by the maximum-likelihood limited
Article
The paper develops a two-step estimator for use in rational-expectations models with autocorrelated residuals and predetermined, but not strictly exogenous, instruments. The estimator extends the applicability of McCallum's (1976) error-in-variablesapproach to estimating such models, and is asymptotically efficient in a class of intrumental-variables estimators. As an application we use instrumental-variables techniques to estimate Taylor's (1979) rational-expectations macroeconomic model of the United States.
Article
Statistical inference for a system of simultaneous, non-linear, implicit equations is discussed. The discussion considers inference as an adjunct to two- and three-stage least squares estimation rather than in a general setting. For both of these cases the non-null asymptotic distribution of a test statistic based on the optimization criterion and a test based on the asymptotic distribution of the estimator is found; a total of four. It is argued that the tests based on the optimization criterion are to be preferred in applications. The methods are illustrated by application to hypotheses implied by the theory of demand using a translog expenditure system and data on personal consumption expenditures for durables, non-durables, and energy for the period 1947– 1971.
Article
The article describes a nonlinear three-stage least-squares estimator for the parameters of a system of simultaneous, nonlinear, implicit equations; the method allows the estimation of these parameters subject to nonlinear parametric restrictions across equations. The estimator is shown to be strongly consistent, asymptotically normally distributed, and more efficient than the nonlinear two-stage least-squares estimator. Some practical implications of the regularity conditions used to obtain these results are discussed from the point of view of one whose interest is in applications, Also, computing methods using readily available nonlinear regression programs are described.
Article
Various minimum $\chi^2$ methods used for generating B.A.N. estimates are summarized, and a new method which generates B.A.N. estimates as roots of certain linear forms is introduced and investigated. As a particular application of the method, the estimation of the bacterial density in an experiment using dilution series is considered.
Article
This paper examines the hypothesis that the expected rate of return to speculation in the forward foreign exchange market is zero; that is, the logarithm of the forward exchange rate is the market's conditional expectation of the logarithm of the future spot rate. A new computationally tractable econometric methodology for examining restrictions on a k-step-ahead forecasting equation is employed. Using data sampled more finely than the forecast interval, we are able to reject the simple market efficiency hypothesis for exchange rates from the 1970s and the 1920s. For the modern experience, the tests are also inconsistent with several alternative hypotheses which typically characterize the relationship between spot and forward exchange rates.
Article
This paper provides an empirical examination of the hypothesis that the forward exchange rate provides an "optimal" forecast of the future spot ex-change rate, for five currencies relative to the dollar. This hypothesis provides a convenient norm for examining the erratic behavior of exchange rates; this erratic behavior represents an efficient market that is quickly incorporating new information into the current exchange rate. This hypothesis is analyzed using two distinct, but related, approaches. The first approach is based on a regression of spot rates on lagged forward rates. When using weekly data and a one month forward exchange rate, ordinary least squares regression analysis of market efficiency is incorrect. Econometric methods are proposed which allow for consistent (though not fully efficient) estimation of the parameters and their standard errors. This paper also presents a new approach for testing exchange market efficiency. This approach is based on a general time series process generating the spot and forward exchange rate. The hypothesis of efficiency implies a set of cross-equation restrictions imposed on the parameters of the time series model. This paper derives these restrictions, proposes a maximum likelihood method of estimating the constrained likelihood function, estimates the model and tests the validity of the restrictions with a likelihood ration statistic.
Article
The consistency and the asymptotic normality of the maximum likelihood estimator in the general nonlinear simultaneous equation model are proved. It is shown that the proof depends on the assumption of normality, unlike in the linear simultaneous equation model. It is proved that the maximum likelihood estimator is asymptotically more efficient than the nonlinear three-stage least squares estimator if the specification is correct. However, the latter has the advantage of being consistent even when the normality assumption is removed. Hausman's instrumental-variable interpretation of the maximum likelihood estimator is extended to the general nonlinear simultaneous equation model.
Article
This paper describes a method for estimating and testing nonlinear rational expectations models directly from stochastic Euler equations. The estimation procedure makes sample counterparts to the population orthogonality conditions implied by the economic model close to zero. An attractive feature of this method is that the parameters of the dynamic objective functions of economic agents can be estimated without explicitly solving for the stochastic equilibrium.
Article
For more than three decades, economic columnist Joseph A. Livingston has canvassed a panel of economists twice a year, eliciting their six-month and twelve-month forecasts for more than a dozen key variables. This study analyzes whether the experts' predictions are unbiased, and whether complete use was made of all relevant, known information (unbiasedness and completeness being necessary conditions for fully rational expectations). Little bias was found in either the half-year or full-year predictions, but extensive underutilization of information--particularly data on monetary growth--occurred.
Article
The primary aim of the paper is to place current methodological discussions in macroeconometric modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement, and the European CVAR Approach to Macroeconometrics” contrasting two different perspectives in Europe and the US that are currently dominating empirical macroeconometric modeling and delves deeper into their methodological/philosophical underpinnings. It is argued that the key to establishing a constructive dialogue between them is provided by a better understanding of the role of data in modern statistical inference, and how that relates to the centuries old issue of the realisticness of economic theories.
Article
This paper describes methods for conveniently formulating and estimating dynamic linear econometric models under the hypothesis of rational expectations. An econometrically convenient formula for the cross-equation rational expectations restrictions is derived. Models of error terms and the role of the concept of Granger causality in formulating rational expectations models are both discussed. Tests of the hypothesis of strict econometric exogeneity along the lines of Sims's are compared with a test that is related to Wu's.
Article
This paper is a revised version of a paper originally en.titled "Asymptotic Properties of Nonlinear Weighted Least Squares Estimators with Independem not Identically Distributed Regressors." In Section 2, the strong consistency of a class of weighted least squares (WLS) estimators is proven under general conditions, as well as the strong consistency of weighted least squares with estimated weights (EWLS). Conditions which ensure asymptotic normality of the estimators are provided in Section 3, and a general statistic for testing hypotheses is given. In Section 4, consequences of misspecification are discussed and a test for misspecification is given. Section 5 contains a summary and concluding remarks. As should be expected, the condi- tions obtained are natural extensions of those found in the fixed regressor case. Also, the unconditional covariance matrix of the parameter estimates has a more general form than the usual conditional covariance matrix
After Keynesian Macroeconomics," in After the Phillips Curve: Persistence of High Inflation and High Unemployment
  • R E Lucas
  • Jr And
  • T J Sargent
LUCAS, R. E., JR., AND T. J. SARGENT: "After Keynesian Macroeconomics," in After the Phillips Curve: Persistence of High Inflation and High Unemployment. Boston: Federal Reserve Bank of Boston, 1978.
The Estimation of Relationships with Autocorrelated Residuals by the Use of Instrumental Variables
POI -: "The Estimation of Relationships with Autocorrelated Residuals by the Use of Instrumental Variables," Journal of the Royal Statistical Society B, 21(1959), 91-105.
The reference numbering from the original has been maintained in this citation list. 11 The Estimation of Economic Relationships using
NOTE: The reference numbering from the original has been maintained in this citation list. 11 The Estimation of Economic Relationships using Instrumental Variables J. D. Sargan Econometrica, Vol. 26, No. 3. (Jul., 1958), pp. 393-415.
The reference numbering from the original has been maintained in this citation list. 2 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica
NOTE: The reference numbering from the original has been maintained in this citation list. 2 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica, Vol. 45, No. 4. (May, 1977), pp. 955-968.
Nonlinear Regression on Cross-Section DataHeteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
WHITE, H.: "Nonlinear Regression on Cross-Section Data," Econometrica, 48(1980), 721-746. [331 -: "Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, 48(1980), 817-838.
org/sici?sici=0012-9682%28198004%2948%3A3%3C721%3ANROCD%3E2.0.CO%3B2-R 33 A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity Halbert White Econometrica
  • Url Stable
Stable URL: http://links.jstor.org/sici?sici=0012-9682%28198004%2948%3A3%3C721%3ANROCD%3E2.0.CO%3B2-R 33 A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity Halbert White Econometrica, Vol. 48, No. 4. (May, 1980), pp. 817-838.
org/sici?sici=0003-4851%28195812%2929%3A4%3C1046%3AAMOGBA%3E2.0.CO%3B2-U 17 Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis Lars Peter Hansen
  • Url Stable
Stable URL: http://links.jstor.org/sici?sici=0003-4851%28195812%2929%3A4%3C1046%3AAMOGBA%3E2.0.CO%3B2-U 17 Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis Lars Peter Hansen; Robert J. Hodrick The Journal of Political Economy, Vol. 88, No. 5. (Oct., 1980), pp. 829-853.
org/sici?sici=0012-9682%28198103%2949%3A2%3C491%3AWDEKAE%3E2.0.CO%3B2-X 10 A Method of Generating Best Asymptotically Normal Estimates with Application to the Estimation of Bacterial Densities Thomas S. Ferguson The Annals of
  • Url Stable
Stable URL: http://links.jstor.org/sici?sici=0012-9682%28198103%2949%3A2%3C491%3AWDEKAE%3E2.0.CO%3B2-X 10 A Method of Generating Best Asymptotically Normal Estimates with Application to the Estimation of Bacterial Densities Thomas S. Ferguson The Annals of Mathematical Statistics, Vol. 29, No. 4. (Dec., 1958), pp. 1046-1062.
jstor.org/sici?sici=0012-9682%28195807%2926%3A3%3C393%3ATEOERU%3E2.0.CO%3B2-R 32 Nonlinear Regression on Cross-Section Data Halbert White Econometrica
  • Url Stable
Stable URL: http://links.jstor.org/sici?sici=0012-9682%28195807%2926%3A3%3C393%3ATEOERU%3E2.0.CO%3B2-R 32 Nonlinear Regression on Cross-Section Data Halbert White Econometrica, Vol. 48, No. 3. (Apr., 1980), pp. 721-746.
org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 21 An Instrumental Variable Approach to Full Information Estimators for Linear and Certain Nonlinear Econometric Models Jerry A
  • Url Stable
Stable URL: http://links.jstor.org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 21 An Instrumental Variable Approach to Full Information Estimators for Linear and Certain Nonlinear Econometric Models Jerry A. Hausman Econometrica, Vol. 43, No. 4. (Jul., 1975), pp. 727-738.
org/sici?sici=0012-9682%28195807%2926%3A3%3C393%3ATEOERU%3E2.0.CO%3B2-R 11 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica
  • Url Stable
Stable URL: http://links.jstor.org/sici?sici=0012-9682%28195807%2926%3A3%3C393%3ATEOERU%3E2.0.CO%3B2-R 11 The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model Takeshi Amemiya Econometrica, Vol. 45, No. 4. (May, 1977), pp. 955-968.
org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 22 The Estimation of Economic Relationships using
  • Url Stable
Stable URL: http://links.jstor.org/sici?sici=0022-3808%28198010%2988%3A5%3C829%3AFERAOP%3E2.0.CO%3B2-J 22 The Estimation of Economic Relationships using Instrumental Variables J. D. Sargan Econometrica, Vol. 26, No. 3. (Jul., 1958), pp. 393-415.