RT Generic
T1 Consistent estimation of conditional conservatism
A1 Cano Rodríguez, Manuel
A1 Núñez-Nickel, Manuel
AB In this paper, we demonstrate analytically that Basu model estimates are affected by twobiases, except if very restrictive conditions are met: an aggregation bias produced by theabsence of the book-to-market ratio in Basu model, and (2) an aggregation problemproduced by the use of total market returns instead of separating the good news and badnews of the period. To solve this problem, we propose an alternative econometric modelthat is robust to both biases. The empirical results obtained using archival datademonstrate the advantages of robustness of our alternative econometric modelcompared to Basu model: it controls the omitted variable bias, is robust to theaggregation effect, its estimates are less influenced by the extreme values of marketreturns, and it presents a higher explanatory power.
PB Social Science Research Network
YR 2011
FD 2011-03
LK https://hdl.handle.net/10016/13793
UL https://hdl.handle.net/10016/13793
LA eng
NO This research is funded by the SEJ2007-65782-C02-02ECON and the ECO2010-22105-C03-03 (subprogram ECON) research projects of the Spanish Ministry of Science and Education,and the INFOINNOVA research project of the Community of Madrid.
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RD 1 sept. 2024