Consistency of a method of moments estimator based on numerical solutions to asset pricing models
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This paper considers the properties of estimators based on numerical solutions to a class of economic models. In particular, the numerical methods discussed are those applied in the solution of linear integral equations, specifically Fredholm equations of the second kind. These integral equations arise out of economic models in which endogenous variables appear linearly in the Euler equations, but for which easily characterized solutions do not exist. Tauchen and Hussey  have proposed the use of these methods in the solution of the consumption-based asset pricing model. In this paper, these methods are used to construct method of moments estimators where the population moments implied by a model are approximated by the population moments of numerical solutions. These estimators are shown to be consistent if the accuracy of the approximation is increased with the sample size. This result depends on the solution method having the property that the moments of the approximate solutions converge uniformly in the model parameters to the moments of the true solutions. © 1993, Cambridge University Press. All rights reserved.
Published Version (Please cite this version)10.1017/S0266466600008008
Publication InfoCraig Burnside, A (1993). Consistency of a method of moments estimator based on numerical solutions to asset pricing models. Econometric Theory, 9(4). pp. 602-632. 10.1017/S0266466600008008. Retrieved from https://hdl.handle.net/10161/2533.
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