Publication Type
Working Paper
Version
publishedVersion
Publication Date
3-2013
Abstract
Continuous-time Levy processes have become increasingly popular in the asset pricing literature and estimation of the mean reversion parameter has attracted attention recently. This paper develops the approximate nite-sample bias of the ordinary least squares or quasi maximum likelihood estimator of the mean reversion parameter in continuous-time Levy processes. Simulations show that in general the approximate bias works well in capturing the true bias of the mean reversion estimator under difference scenarios. However, when the time span is small and the mean reversion parameter is approaching its lower bound, we find it more difficult to approximate well the nite-sample bias.
Keywords
Bias, Mean Reversion Parameter, Levy processes
Discipline
Econometrics
Research Areas
Econometrics
Volume
02-2013
First Page
1
Last Page
20
Publisher
SMU Economics and Statistics Working Paper Series, No. 02-2013
City or Country
Singapore
Citation
BAO, Yong; ULLAH, Aman; WANG, Yun; and YU, Jun.
Bias in the Mean Reversion Estimator in Continuous-Time Gaussian and Lévy Processes. (2013). 02-2013, 1-20.
Available at: https://ink.library.smu.edu.sg/soe_research/1503
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.