Analytical GMM Tests: Asset Pricing with Time-Varying Risk Premiums
提出一种可解析求解的广义矩方法（GMM）检验，用于时变风险溢价的资产定价模型，模拟显示有限样本性质良好，并应用于行业组合收益的潜在因子数检验，发现单因子模型被拒绝而双因子模型未被拒绝。
We propose alternative generalized method of moments (GMM) tests that are analytically solvable in many econometric models, yielding in particular analytical GMM tests for asset pricing models with time-varying risk premiums. We also provide simulation evidence showing that the proposed tests have good finite sample properties and that their asymptotic distribution is reliable for the sample size commonly used. We apply our tests to study the number of latent factors in the predictable variations of the returns on portfolios grouped by industries. Using data from October 1941 to September 1986 and two sets of instrumental variables, we find that the tests reject a one-factor model but not a two-factor one.