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Handbook of Quantitative Finance and Risk Management
A. Introduction Empirical finance research often employs a single equation for estimation and testing. However, single equation rarely happens in the economic or financial theory. Using OLS method to estimate equation(s) which should otherwise be treated as a simultaneous equation system is likely to produce biased and inconsistent parameter estimators. To illustrate, let's start with a simple Keynesian consumption function specified as the follow: Where t C is the consumption expenditure atdoi:10.1007/978-0-387-77117-5_86 fatcat:lk2f6razlbdzxna6pjkjegsp3q