Applications of the Characteristic Function Based Continuum GMM in Finance

Computational Statistics & Data Analysis

40 Pages Posted: 29 Dec 2009 Last revised: 24 Mar 2012

See all articles by Rachidi Kotchoni

Rachidi Kotchoni

Université Paris Nanterre; African Development Bank

Date Written: August 1, 2010

Abstract

A review of the theoretical properties of the GMM with a continuum of moment conditions is presented. Numerical methods for its implementation are discussed. A simulation study based on the stable distribution and an empirical application based on the autoregressive variance Gamma model are performed. Using the Alcoa price data, the findings suggest that investors require a positive premium for bearing the expected risk while a negative penalty is attached to unexpected risk.

Keywords: Autoregressive variance Gamma model, Continuum of Moments Conditions, Simulation, Stable Distribution,

JEL Classification: C01, C13, C15, C60

Suggested Citation

Kotchoni, Rachidi, Applications of the Characteristic Function Based Continuum GMM in Finance (August 1, 2010). Computational Statistics & Data Analysis , Available at SSRN: https://ssrn.com/abstract=1522302

Rachidi Kotchoni (Contact Author)

Université Paris Nanterre ( email )

200 Avenue de la République
Nanterre, Hauts de Seine 92000
France

African Development Bank ( email )

Rue Joseph Anoma
Abidjan, Ivory Coast 01 BP 1387
Ivory Coast (Cote D'ivoire)

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