Robust Estimation and Forecasting of the Capital Asset Pricing Model

Arbeitspapier

In this paper, we develop a modified maximum likelihood (MML) estimator for the multiple linear regression model with underlying student t distribution. We obtain the closed form of the estimators, derive the asymptotic properties, and demonstrate that the MML estimator is more appropriate for estimating the parameters of the Capital Asset Pricing Model by comparing its performance with least squares estimators (LSE) on the monthly returns of US portfolios. The empirical results reveal that the MML estimators are more efficient than LSE in terms of the relative efficiency of one-step-ahead forecast mean square error in small samples

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 13-036/III

Classification and Topics

• Classification: Wirtschaft
• Subject: Maximum likelihood estimators ; Modified maximum likelihood estimators ; Student t family ; Capital asset pricing model ; Robustness ; Maximum-Likelihood-Methode ; CAPM ; Robustes Verfahren ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bian, Guorui ; McAleer, Michael ; Wong, Wing-Keung
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/87477
• Last update: 10.03.2025, 11:43 AM CET