Advances in Decision Sciences
Volume 2012 (2012), Article ID 571034, 12 pages
http://dx.doi.org/10.1155/2012/571034
Research Article

Statistical Estimation for CAPM with Long-Memory Dependence

Tomoyuki Amano,1 Tsuyoshi Kato,2 and Masanobu Taniguchi2

1Faculty of Economics, Wakayama University, Wakayama 6408510, Japan
2Department of Applied Mathematics, School of Fundamental Science and Engineering, Waseda University, Tokyo 1698555, Japan

Received 24 June 2011; Revised 27 August 2011; Accepted 10 September 2011

Academic Editor: Junichi Hirukawa

Copyright © 2012 Tomoyuki Amano et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

We investigate the Capital Asser 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 process and correlated with each other. We give a sufficient condition for the return of assets in the CAPM to be 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.