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st: Estimation of Limited depandat variable model with MLE


From   nadir virk <nadirvirk@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Estimation of Limited depandat variable model with MLE
Date   Mon, 23 May 2011 16:17:08 +0300

Hi All,
I want to estimate the transaction cost measures for cost of selling
and cost of buying in equity markets as is done in
Lesmond, D., Ogden, J, Trzcinka, C.,1999, A new estimate of
transaction costs, Review of financial studies,12,1113-1141.
They have explained the procedure in Appendix B if somebody coouldn't
understand what I am narrating here,
They specified three regions in the distribution of y(i's) and x(i's)
[its a single factor capm model]. They maximized the liklihood
function  with respect to four unknowns (alpha1,alpha2, market beta
and sigma of normal distribution).
The maximization is done  for three regions  simultaneously such that
1-where x's (independant variable) is greater than zero (region1) with
unknown parametrs (alpha1, beta and sigma)
2-where x's are less than zero (region2) with parameters alpha2,beta and sigma
3- when x's are exactly equal to zero.
They maximized these regions simultaneosly and estimated the unknown
paramters. I can't figure it out how to specify it under tobit
command, which fits the model over the whole distribution (if is
possible then excuse me as I don't know how!). But in this case we
need to estimate the alpha1 and alpha2 from region1 and region2
respectively and also the a constant sigma of error distribution.
Any help will be highly appreciated.
Thanks,
Nader
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