Alternative methods to deal with measurement error

Hong Yi Chen; Alice C. Lee; Cheng Few Lee

doi:10.1142/9789811202391_0037

Alternative methods to deal with measurement error

Hong Yi Chen, Alice C. Lee, Cheng Few Lee

Rutgers Business School, Finance & Economics

Research output: Chapter in Book/Report/Conference proceeding › Chapter

2 Scopus citations

Abstract

Specification error and measurement error are two major issues in finance research. The main purpose of this chapter is (i) to review and extend existing errors-in-variables (EIV) estimation methods, including classical method, grouping method, instrumental variable method, mathematical programming method, maximum likelihood method, LISREL method, and the Bayesian approach; (ii) to investigate how EIV estimation methods have been used to finance related studies, such as cost of capital, capital structure, investment equation, and test capital asset pricing models; and (iii) to give a more detailed explanation of the methods used by Almeida et al. (2010).

Original language	English (US)
Title of host publication	Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning (In 4 Volumes)
Publisher	World Scientific Publishing Co.
Pages	1439-1484
Number of pages	46
ISBN (Electronic)	9789811202391
ISBN (Print)	9789811202384
DOIs	https://doi.org/10.1142/9789811202391_0037
State	Published - Jan 1 2020

All Science Journal Classification (ASJC) codes

Economics, Econometrics and Finance(all)
Business, Management and Accounting(all)

Keywords

Bayesian approach
Capital asset pricing model
Capital structure
Classical method
Cost of capital
Errors-in-variables
Grouping method
Instrumental variable method
Investment equation
LISREL method
Mathematical programming method
Maximum likelihood method
Measurement error

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10.1142/9789811202391_0037

Cite this

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abstract = "Specification error and measurement error are two major issues in finance research. The main purpose of this chapter is (i) to review and extend existing errors-in-variables (EIV) estimation methods, including classical method, grouping method, instrumental variable method, mathematical programming method, maximum likelihood method, LISREL method, and the Bayesian approach; (ii) to investigate how EIV estimation methods have been used to finance related studies, such as cost of capital, capital structure, investment equation, and test capital asset pricing models; and (iii) to give a more detailed explanation of the methods used by Almeida et al. (2010).",

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AB - Specification error and measurement error are two major issues in finance research. The main purpose of this chapter is (i) to review and extend existing errors-in-variables (EIV) estimation methods, including classical method, grouping method, instrumental variable method, mathematical programming method, maximum likelihood method, LISREL method, and the Bayesian approach; (ii) to investigate how EIV estimation methods have been used to finance related studies, such as cost of capital, capital structure, investment equation, and test capital asset pricing models; and (iii) to give a more detailed explanation of the methods used by Almeida et al. (2010).

KW - Bayesian approach

KW - Capital asset pricing model

KW - Capital structure

KW - Classical method

KW - Cost of capital

KW - Errors-in-variables

KW - Grouping method

KW - Instrumental variable method

KW - Investment equation

KW - LISREL method

KW - Mathematical programming method

KW - Maximum likelihood method

KW - Measurement error

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PB - World Scientific Publishing Co.

ER -

Alternative methods to deal with measurement error

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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