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The Analytical Covariance Matrix for Regime - Switch in Models

Author

Listed:
  • Andrea B

    (Department of Economics, University of Münster, Germany)

  • Benedikt R

    (Department of Economics, University of Münster, Germany)

Abstract

This letter provides an analytical solution for the covariance matrix related to the (mean) parameters of the standard Markov-switching model. The importance of avoiding numerical procedures to estimate this matrix is also highlighted. Simulations are also performed in order to verify, in small samples, the actual advantage of the analytical formula.

Suggested Citation

  • Andrea B & Benedikt R, 2017. "The Analytical Covariance Matrix for Regime - Switch in Models," Biostatistics and Biometrics Open Access Journal, Juniper Publishers Inc., vol. 4(1), pages 1-3, November.
    • Handle: RePEc:adp:jbboaj:v:4:y:2017:i:1:p:1-3
    DOI: 10.19080/BBOAJ.2017.04.555626
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    References listed on IDEAS

    as
    1. Ruud, Paul A., 1991. "Extensions of estimation methods using the EM algorithm," Journal of Econometrics, Elsevier, vol. 49(3), pages 305-341, September.
    2. Hamilton, James D., 1996. "Specification testing in Markov-switching time-series models," Journal of Econometrics, Elsevier, vol. 70(1), pages 127-157, January.
    3. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
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