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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 * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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