EMPIRICAL BAYES ESTIMATION WITH DYNAMIC PORTFOLIO MODELS 11 th May 2004
نویسندگان
چکیده
This paper considers the estimation of parameters in a dynamic stochastic model for securities prices, where the expected rate of return is a random variable. An empirical Bayes estimator is developed from the model structure. The estimator is an improvement on other popular estimators in terms of mean squared error. The e ect of reduced estimation error on accumulated wealth is analyzed for the portfolio choice model with constant relative risk aversion utility.
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