Journal
APPLIED ECONOMICS LETTERS
Volume 27, Issue 12, Pages 997-1001Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/13504851.2019.1657228
Keywords
Heteroskedasticity; GMM; WLS; financial wealth equation
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Funding
- National Natural Science Foundation of China [71601094]
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We propose a generalized method of moments (GMM) estimator, where our specific moment conditions, where our specific moment conditions ensure that the GMM estimator is asymptotically at least as efficient as ordinary least squares (OLS) and whatever competing weighted least squares (WLS) we wish to consider. With a popular exponential model of heteroskedasticity, our new GMM estimator performs significantly better than OLS or WLS. In an empirical application to a financial wealth equation, we show that the efficiency gains can be nontrivial with real data.
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