One necessary condition for the two-pass risk premium estimator to be consistent and asymptotically normal is that the rank of the beta matrix in a proposed linear asset pricing model is full column. I first investigate the asymptotic properties of the risk premium estimators and the related t-test and Wald test statistics when the full rank condition fails. I show that the beta risk of useless factors or multiple proxy factors for a true factor are priced more often than they should be at the nominal size in the asset pricing models omitting some true factors.
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- Partial requirement for: Ph. D., Arizona State University, 2011Note typethesis
- Includes bibliographical references (p. 72-74)Note typebibliography
- Field of study: Economics