Estimation in models for security prices

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Abstract
In the study of capital markets, security prices play a crucial allocative role. This paper presents stochastic models for the relative security prices, and shows how to estimate these random processes based on historical price data. The models may have continuous components as well as discrete jumps at random time points. Their construction may be a result of a simultaneous equations system, where the underlying determinants are supply and demand. Some of the resulting estimators turn out to be stochastic integrals, which must be computed numerically in practice. Others are of a very simple form, and can be computed directly. Large sample statistical properties, such as consistency and limiting distributions, are derived.

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