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Robust GMM tests for structural breaks

Gagliardini, Patrick ; Trojani, Fabio ; Urga, Giovanni

In: Journal of Econometrics, 2005, vol. 129, no. 1-2, p. 139-182

We propose a class of new robust GMM tests for endogenous structural breaks. The tests are based on supremum, average and exponential functionals derived from robust GMM estimators with bounded influence function. We study the theoretical local robustness properties of the new tests and show that they imply a uniformly bounded asymptotic sensitivity of size and power under general local...

Homogeneity hypothesis in the context of asset pricing models : the quadratic market model

Barone-Adesi, Giovanni ; Gagliardini, Patrick ; Urga, Giovanni

This paper proposes a two factor model for asset pricing. We formulate a model of asset returns that in addition to the traditional market return term includes also the square of the market return to account for risk originating from coskewness with the market portofolio. The quadratic term is able to account for heterogeneities across portfolios. We conclude that the extra term is significant...