M-ESTIMATORS FOR ASYMMETRIC PRICE TRANSMISSION MODELLING

Résumé

This paper introduces and compares M-estimators and OLS for modelling the Granger and Lee asymmetric price transmission model when the true data generating process is known.Results of 1000 Monte Carlo simulations, indicate that for normal data, the estimates of the coefficients of the Granger and Lee asymmetric price transmission model derived from the Least squares method as well as the M-and MM-estimation methods are accurate and equivalent to their true values.For data with outliers, estimates of the coefficients of the Granger and Lee asymmetric price transmission model derived using the Least squares method were inaccurate and different from their true values.In large samples, the Mestimation method produced accurate estimates that were equivalent to their true values in the presence of outliers.The MM-estimation method produced accurate estimates that were equivalent to their true values in the presence of outliers irrespective of sample size.These results indicate that the proposed M-and MM-estimation techniques are likely to do no worse than the OLS with normal dataset and promise to do better when the dataset has outliers within the asymmetric price transmission modelling framework.

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