Richard E. Quandt

Bio: Richard E. Quandt is an academic researcher from Princeton University. The author has contributed to research in topics: Disequilibrium & Econometric model. The author has an hindex of 34, co-authored 103 publications receiving 8432 citations.

Tests of the Hypothesis That a Linear Regression System Obeys Two Separate Regimes

Abstract: Several approaches are explored for testing the hypothesis that no switch has occurred in the true values of the parameters of a linear regression system. The distribution of the relevant likelihood ratio λ is analyzed on the basis of the empirical distribution resulting from some sampling experiments. The hypothesis that −2 log λ has the χ2 distribution with the appropriate degrees of freedom is rejected and an empirical table of percentage points is obtained. Finally some small sample tests are suggested.

The Estimation of the Parameters of a Linear Regression System Obeying Two Separate Regimes

Abstract: In attempting to estimate the parameters of a linear regression system obeying two separate regimes, it is necessary first to estimate the position of the point in time at which the switch from one regime to the other occurred The suggested maximum likelihood estimating procedure is based upon a direct examination of the likelihood function An asymptotic and a small-sample test are suggested for testing the hypothesis that no switch occurred against the single alternative that one switch took place The procedure is illustrated with a sampling experiment in which the true switching point is correctly estimated * I am indebted to Professors F Anscombe, R Dorfman and F Stephan and the referees of this paper for criticism and helpful suggestions I am also indebted to Professor John S Chipman for originally suggesting the problem The responsibility for errors is, of course, mine

Microeconomic Theory: A Mathematical Approach

Abstract: Microeconomic theory: a mathematical approach , Microeconomic theory: a mathematical approach , مرکز فناوری اطلاعات و اطلاع رسانی کشاورزی

Some Tests for Homoscedasticity

Abstract: Two exact tests are presented for testing the hypothesis that the residuals from a least squares regression are homoscedastic. The results can be used to test the hypothesis that a linear [ratio] model explains the relationship between variables as opposed to the alternative that the ratio [linear] specification is correct. The first test is parametric and uses the F-statistic. The second test is nonparametric and uses the number of peaks in the ordered sequence of unsigned residuals. In conclusion, the results of some experimental calculations of the powers of the tests are discussed.

The Pricing of Options and Corporate Liabilities

Abstract: If options are correctly priced in the market, it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks. Using this principle, a theoretical valuation formula for options is derived. Since almost all corporate liabilities can be viewed as combinations of options, the formula and the analysis that led to it are also applicable to corporate liabilities such as common stock, corporate bonds, and warrants. In particular, the formula can be used to derive the discount that should be applied to a corporate bond because of the possibility of default.

Econometric Analysis of Cross Section and Panel Data

Abstract: The second edition of this acclaimed graduate text provides a unified treatment of two methods used in contemporary econometric research, cross section and data panel methods. By focusing on assumptions that can be given behavioral content, the book maintains an appropriate level of rigor while emphasizing intuitive thinking. The analysis covers both linear and nonlinear models, including models with dynamics and/or individual heterogeneity. In addition to general estimation frameworks (particular methods of moments and maximum likelihood), specific linear and nonlinear methods are covered in detail, including probit and logit models and their multivariate, Tobit models, models for count data, censored and missing data schemes, causal (or treatment) effects, and duration analysis. Econometric Analysis of Cross Section and Panel Data was the first graduate econometrics text to focus on microeconomic data structures, allowing assumptions to be separated into population and sampling assumptions. This second edition has been substantially updated and revised. Improvements include a broader class of models for missing data problems; more detailed treatment of cluster problems, an important topic for empirical researchers; expanded discussion of "generalized instrumental variables" (GIV) estimation; new coverage (based on the author's own recent research) of inverse probability weighting; a more complete framework for estimating treatment effects with panel data, and a firmly established link between econometric approaches to nonlinear panel data and the "generalized estimating equation" literature popular in statistics and other fields. New attention is given to explaining when particular econometric methods can be applied; the goal is not only to tell readers what does work, but why certain "obvious" procedures do not. The numerous included exercises, both theoretical and computer-based, allow the reader to extend methods covered in the text and discover new insights.

A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity

Abstract: This paper presents a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic. This estimator does not depend on a formal model of the structure of the heteroskedasticity. By comparing the elements of the new estimator to those of the usual covariance estimator, one obtains a direct test for heteroskedasticity, since in the absence of heteroskedasticity, the two estimators will be approximately equal, but will generally diverge otherwise. The test has an appealing least squares interpretation.

Theory of rational option pricing

Abstract: The long history of the theory of option pricing began in 1900 when the French mathematician Louis Bachelier deduced an option pricing formula based on the assumption that stock prices follow a Brownian motion with zero drift. Since that time, numerous researchers have contributed to the theory. The present paper begins by deducing a set of restrictions on option pricing formulas from the assumption that investors prefer more to less. These restrictions are necessary conditions for a formula to be consistent with a rational pricing theory. Attention is given to the problems created when dividends are paid on the underlying common stock and when the terms of the option contract can be changed explicitly by a change in exercise price or implicitly by a shift in the investment or capital structure policy of the firm. Since the deduced restrictions are not sufficient to uniquely determine an option pricing formula, additional assumptions are introduced to examine and extend the seminal Black-Scholes theory of option pricing. Explicit formulas for pricing both call and put options as well as for warrants and the new "down-and-out" option are derived. The effects of dividends and call provisions on the warrant price are examined. The possibilities for further extension of the theory to the pricing of corporate liabilities are discussed.

A New Approach to Consumer Theory

Abstract: Activity analysis is extended into consumption theory. It is assumed that goods possess, or give rise to, multiple characteristics in fixed proportions and that it is these characteristics, not goods themselves, on which the consumer’s preferences are exercised.