Please use this identifier to cite or link to this item:
http://dspace.mediu.edu.my:8181/xmlui/handle/10419/19687| Title: | A note on the coefficient of determination in regression models with infinite-variance variables |
| Keywords: | C13 C21 G12 C12 ddc:330 Regression models alpha-stable distributions infinite variance coefficient of determination Fama-MacBeth regression Monte Carlo simulation Regression Schätztheorie Statistische Verteilung Capital Asset Pricing Model Theorie |
| Issue Date: | 16-Oct-2013 |
| Description: | Since Mandelbrot's seminal work (1963), alpha-stable distributions with infinite variance have been regarded as a more realistic distributional assumption than the normal distribution for some economic variables, especially financial data. After providing a brief survey of theoretical results on estimation and hypothesis testing in regression models with infinite-variance variables, we examine the statistical properties of the coefficient of determination in regression models with infinite-variance variables. These properties differ in several important aspects from those in the well-known finite variance case. In the infinite-variance case when the regressor and error term share the same index of stability, the coefficient of determination has a nondegenerate asymptotic distribution on the entire [0,1] interval, and the probability density function of this distribution is unbounded at 0 and 1. We provide closedform expressions for the cumulative distribution function and probability density function of this limit random variable. In an empirical application, we revisit the Fama-MacBeth two-stage regression and show that in the infinite variance case the coefficient of determination of the second-stage regression converges to zero asymptotically. |
| URI: | http://koha.mediu.edu.my:8181/xmlui/handle/10419/19687 |
| Other Identifiers: | http://hdl.handle.net/10419/19687 ppn:529232138 RePEc:zbw:bubdp1:5574 |
| Appears in Collections: | EconStor |
Files in This Item:
There are no files associated with this item.
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.