Statistical estimation for CAPM with long-memory dependence (Q764801)

Summary: We investigate the capital asset pricing model (CAPM) with time dimension. By using time series analysis, we discuss the estimation of CAPM when market portfolio and the error process are long-memory procesess and correlated with each other. We give a sufficient condition for the return of assets in the CAPM to be of short memory. In this setting, we propose a two-stage least squares estimator for the regression coefficient and derive the asymptotic distribution. Some numerical studies are given. They show an interesting feature of this model.