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A0220
Title: Testing beta constancy in asset pricing models Authors:  Luis Antonio Arteaga Molina - Universidad de Cantabria (Spain) [presenting]
Juan Manuel Rodriguez-Poo - Universidad de Cantabria (Spain)
Abstract: A methodology is proposed for testing coefficients constancy in varying coefficient asset pricing models with endogenous regressors. The testing procedure is defined as a generalized likelihood ratio that focus on the comparison of the restricted and unrestricted sum of squared residuals. As a by product, we have developed a nonparametric method that takes into account the endogenous nature of the regressors to estimate the prices of risk. Resembling the instrumental variable literature, we propose to use a three stages estimation procedure to estimate the varying coefficient; besides we establish the asymptotic properties of the estimators. Finally, we investigate the finite sample properties of our test by means of Monte Carlo experiments study and using critical values and p-values estimated by the bootstrap technique.