A Short Introduction to the Generalized Method of Moments Estimation

Seppo Pynnonen, Department of Mathematics and Statistics, University of Vaasa.

Contents:

1. Introduction
2. The Classical Method of Moments
3. The Generalized Method of Moments
4. Examples, using SAS and EViews
   Consumption Asset Pricing example.

Literature:

• Hansen, Lars, Peter (1982). Large sample properties of generalized method of moments estimators. Econometrica, 50, 1029--1054.
• Jagannathan, Ravi, Georgios Skoulakis, and Zhenyu Wang (2002). Generalized method of moments: applications in Finance. Journal of Business & Economic Statistics, 20, 4, 470--481.
• Hansen, Bruce, E. and Kenneth D. West. (2002). Generalized method of moments and macroeconomics. Journal of Business & Economic Statistics, 20, 4, 460--469.
• Ghysels, Eric and Alastair R. Hall (2002). Interview with Lars Peter Hansen. Journal of Business & Economic Statisitcs, 20, 4, 442--447.
• Cochrane, John (2001). Asset Pricing. Princeton University Press, Chapter nn.
• Hall, Alastair, R. (2004). Generalized Method of Moments. Oxford University Press.
• Campbell, John Y., Andew W. Lo, and A. Craig MacKinlay (1997). The Econometrics of Financial Markets. Princeton University Press. (Appendix a2)
  
• Some mathematical and stochastic convergence consepts (pdf)

The generalized method of moments is a very general statistical method for obtaining estimates of parameters of statistical models. It is a generalization, developed by Lars Peter Hansen, of the method of moments.

The term GMM is very popular among econometricians but is hardly used at all outside of economics, where the slightly more general term estimating equations is preferred

• Lars Peter Hansen (1982): Large Sample Properties of Generalized Method of Moments Estimators, Econometrica 50, 1029-1054.
• Lars Peter Hansen (2002): Method of Moments in International Encyclopedia of the Social and Behavior Sciences, N. J. Smelser and P. B. Bates (editors), Pergamon: Oxford.
• Kirby Faciane (2006): Statistics for Empirical and Quantitative Finance. H.C. Baird: Philadelphia. ISBN 0-9788208-9-4.
• Alastair R. Hall (2005). Generalized Method of Moments (Advanced Texts in Econometrics). Oxford University Press. ISBN 0-19-877520-2.

Estimating a Consumption-Based Asset Pricing Model using GMM

http://support.sas.com/rnd/app/examples/ets/harvey/index.htm

-- Estimating a Consumption-Based Asset Pricing Model. ... by using Hansen's (1982) generalized method of moments (GMM) to estimate the