Re: [Gretl-users] Fama and French using GMM in Grelt
On Wed, 8 Feb 2012, Anutechia Asongu wrote:
I have a qualm applying a four-factor Fama and French model
with Grelt.
The name is "gretl".
The reference article I''m using applies GMM. As far as I
have perused GMM goes with instruments(moment conditions).
But in this article, no reference is made to choice of
instruments. Is there a GMM application on Grelt that
doesn't require instruments for its application?.
No, not in gretl and not anywhere. The principle of GMM is to
choose parameter values that satisfy (or come as close as
possible to satisfying) a set of orthogonality conditions.
Each orthogonality condition takes the form
u is orthogonal to z
where the z's are the "instruments". In a very simple case
(where GMM as such is not really required) the set of
instruments may coincide with the set of regressors.
See chapter 20 of the Gretl User's Guide for details.
Allin Cottrell