This paper derives conditions under which the generalized method of moments (GMM) estimator is as efficient as the maximum likelihood estimator (MLE). The data are supposed to be drawn from a parametric family and to be stationary Markov. We study the efficiency of GMM in a general framework...

We propose a new test for the stability of parameters in a Markov switching model where regime changes are driven by an unobservable Markov chain. Testing in this context is more challenging than testing in structural change and threshold models because, besides the presence of nuisance...

In many circumstances, the likelihood function does not have a simple tractable expression. The main examples discussed in the paper are the convolution and the mixture of distributions. Finite mixture models are commonly used to model data from a population composed of a finite number of...

We introduce a new approximation method for the distribution of functions of random variables that are real-valued. The approximation involves moment matching and exploits properties of the class of normal inverse Gaussian distributions. In the paper we we examine the how well the different...

We study how heterogeneous beliefs affect returns and examine whether heterogeneous beliefs are a priced factor in traditional asset pricing models. To accomplish this task, we suggest new empirical measures based on the disagreement among analysts about expected (short-term and long-term)...

Breeden, Gibbons and Litzenberger (1989), and Lamont (1999), use "economic tracking portfolios" to forecast macroeconomic data. Tracking portfolios are constructed to reflect market expectations and reveal the impact of news. However, these papers, as well as many related studies which examine...