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A mixture autoregressive model based on Gaussian and Student’s t-distributions

Author

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  • Virolainen Savi

    (Faculty of Social Sciences, University of Helsinki, P. O. Box 17, Helsinki, FI–00014, Finland)

Abstract

We introduce a new mixture autoregressive model which combines Gaussian and Student’s t mixture components. The model has very attractive properties analogous to the Gaussian and Student’s t mixture autoregressive models, but it is more flexible as it enables to model series which consist of both conditionally homoscedastic Gaussian regimes and conditionally heteroscedastic Student’s t regimes. The usefulness of our model is demonstrated in an empirical application to the monthly U.S. interest rate spread between the 3-month Treasury bill rate and the effective federal funds rate.

Suggested Citation

  • Virolainen Savi, 2022. "A mixture autoregressive model based on Gaussian and Student’s t-distributions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 26(4), pages 559-580, September.
    • Handle: RePEc:bpj:sndecm:v:26:y:2022:i:4:p:559-580:n:3
    DOI: 10.1515/snde-2020-0060
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