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Information theoretic approach to high dimensional multiplicative models: stochastic discount factor and treatment effect

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  • Qiu, Chen
  • Otsu, Taisuke

Abstract

This paper is concerned with estimation of functionals of a latent weight function that satisfies possibly high-dimensional multiplicative moment conditions. Main examples are functionals of stochastic discount factors in asset pricing, missing data problems, and treatment effects. We propose to estimate the latent weight function by an information theoretic approach combined with the ℓ 1-penalization technique to deal with high-dimensional moment conditions under sparsity. We study asymptotic properties of the proposed method and illustrate it by a theoretical example on treatment effect analysis and empirical example on estimation of stochastic discount factors.

Suggested Citation

  • Qiu, Chen & Otsu, Taisuke, 2022. "Information theoretic approach to high dimensional multiplicative models: stochastic discount factor and treatment effect," LSE Research Online Documents on Economics 110494, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:110494
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    File URL: http://eprints.lse.ac.uk/110494/
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    References listed on IDEAS

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    Keywords

    information theoretic approach; high-dimensional model; stochastic discount factor; treatment effect; Diamond journal; no fee;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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