Spurious Inference in Reduced-Rank Asset-Pricing Models

• 成果类型: Article
• 署名作者: Gospodinov, Nikolay; Kan, Raymond; Robotti, Cesare
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Atlanta; University of Toronto; University System of Georgia; University of Georgia
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA13750
• 发表日期: 2017
• 页码: 1613-1628
• 关键词: large-sample properties; DISCOUNT FACTOR MODELS; moments estimators; generalized-method; instrumental variables; Empirical Likelihood; risk-factors; tests; gmm; identification

摘要

This note studies some seemingly anomalous results that arise in possibly misspecified, reduced-rank linear asset-pricing models estimated by the continuously updated generalized method of moments. When a spurious factor (that is, a factor that is uncorrelated with the returns on the test assets) is present, the test for correct model specification has asymptotic power that is equal to the nominal size. In other words, applied researchers will erroneously conclude that the model is correctly specified even when the degree of misspecification is arbitrarily large. The rejection probability of the test for overidentifying restrictions typically decreases further in underidentified models where the dimension of the null space is larger than 1.