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The Empirical Saddlepoint Estimator
Holcblat, Benjamin; Sowell, Fallaw
20172017 Computational Financial Econometrics Conference
 

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Keywords :
Empirical saddlepoint approximation; Moment-based estimation; Small-sample asymptotic;
Abstract :
[en] Previous studies have shown that existing moment-based estimation approaches have poor small-sample performance in some applications. We propose an alternative that is based on the ESP (empirical saddlepoint) approximation of the solutions to the empirical moment conditions. Saddlepoint approximations are known to perform well in small sample. The novel estimator proposed, which we call the ESP estimator, is the mode of the ESP approximation. We show that it is consistent and asymptotically normal, and we study its higher-order bias. We propose novel test statistics based on the ESP estimator. Finally, we also investigate the finite-sample properties of the ESP estimator and related test statistics through Monte-Carlo simulations.
Disciplines :
Quantitative methods in economics & management
Author, co-author :
Holcblat, Benjamin  ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF)
Sowell, Fallaw;  Carnegie Mellon University > Tepper Business School
External co-authors :
yes
Language :
English
Title :
The Empirical Saddlepoint Estimator
Publication date :
17 December 2017
Event name :
2017 Computational Financial Econometrics Conference
Event organizer :
CFEnetwork, Birkbeck University of London and King's College London
Event place :
London, United Kingdom
Event date :
16-18 December 2017
Audience :
International
References of the abstract :
Previous studies have shown that existing moment-based estimation approaches have poor small-sample performance in some applications. We propose an alternative that is based on the ESP (empirical saddlepoint) approximation of the solutions to the empirical moment conditions. Saddlepoint approximations are known to perform well in small sample. The novel estimator proposed, which we call the ESP estimator, is the mode of the ESP approximation. We show that it is consistent and asymptotically normal, and we study its higher-order bias. We propose novel test statistics based on the ESP estimator. Finally, we also investigate the finite-sample properties of the ESP estimator and related test statistics through Monte-Carlo simulations.
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