Dear all, I want to do piecewise CAPM linear regression in R: RRiskArbâRf = (1âδ)[αMktLow+βMktLow(RMktâRf)] + δ[αMkt High +βMkt High(RMkt âRf )]
where δ is a dummy variable if the excess return on the value-weighted CRSP index is above a threshold level and zero otherwise. and at the same time add the restriction: αMkt Low + βMkt Low · Threshold = αMkt High + βMkt High · Threshold to ensure continuity. But I do not know how to add this restriction in R, could you help me on this? Thanks a lot! Eunice [[alternative HTML version deleted]]
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