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A Note on the Use of the Two-Stage Least Squares Estimator in Financial Models

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  • Lloyd, William P.

Abstract

Financial or capital market theory is intimately concerned with the concept of a general equilibrium. But most of the empirical work in finance has been concerned with the estimation of single-equation ordinary least squares cross-sectional models. One way of capturing some of the flavor of a general equilibrium is to use a simultaneous equation valuation model. Thus the value or the return on a security can be determined simultaneously in relationship to and in competition with the other securities in the system. Simkowitz and Jones [4] have recently described how the methodology could be used. Simkowitz and Logue [5] have recently performed a study using this methodology.

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  • Lloyd, William P., 1975. "A Note on the Use of the Two-Stage Least Squares Estimator in Financial Models," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 10(1), pages 143-149, March.
    • Handle: RePEc:cup:jfinqa:v:10:y:1975:i:01:p:143-149_01
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    Cited by:

    1. Pamela Parrish Peterson, 1980. "A Re-Examination Of Seemingly Unrelated Regressions Methodology Applied To Estimation Of Financial Relationships," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 3(3), pages 297-308, September.

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