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Dynamic Tobit models

Author

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  • Harvey, A.
  • Liao, Y.

Abstract

Score-driven models provide a solution to the problem of modelling time series when the observations are subject to censoring and location and/or scale may change over time. The method applies to generalized-t and EGB2 distributions, as well as to the normal distribution. A set of Monte Carlo experiments show that the score-driven model provides good forecasts even when the true model is parameterdriven. The viability of the new models is illustrated by fitting them to data on Chinese stock returns.

Suggested Citation

  • Harvey, A. & Liao, Y., 2019. "Dynamic Tobit models," Cambridge Working Papers in Economics 1913, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1913
    Note: ach34
    as

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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1913.pdf
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    References listed on IDEAS

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    1. Chao Wang & Kung-Sik Chan, 2018. "Quasi-Likelihood Estimation of a Censored Autoregressive Model With Exogenous Variables," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 113(523), pages 1135-1145, July.
    2. Harvey, Andrew & Thiele, Stephen, 2016. "Testing against changing correlation," Journal of Empirical Finance, Elsevier, vol. 38(PB), pages 575-589.
    3. Harvey,Andrew C., 2013. "Dynamic Models for Volatility and Heavy Tails," Cambridge Books, Cambridge University Press, number 9781107630024.
    4. Tata Subba Rao & Granville Tunnicliffe Wilson & Andrew Harvey & Rutger-Jan Lange, 2017. "Volatility Modeling with a Generalized t Distribution," Journal of Time Series Analysis, Wiley Blackwell, vol. 38(2), pages 175-190, March.
    5. McDonald, James B. & Xu, Yexiao J., 1995. "A generalization of the beta distribution with applications," Journal of Econometrics, Elsevier, vol. 69(2), pages 427-428, October.
    6. Lee, Lung-fei, 1999. "Estimation of dynamic and ARCH Tobit models," Journal of Econometrics, Elsevier, vol. 92(2), pages 355-390, October.
    7. Randall A. Lewis & James B. McDonald, 2014. "Partially Adaptive Estimation of the Censored Regression Model," Econometric Reviews, Taylor & Francis Journals, vol. 33(7), pages 732-750, October.
    8. McDonald, James B. & Newey, Whitney K., 1988. "Partially Adaptive Estimation of Regression Models via the Generalized T Distribution," Econometric Theory, Cambridge University Press, vol. 4(3), pages 428-457, December.
    9. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    10. Siem Jan Koopman & André Lucas & Marcel Scharth, 2016. "Predicting Time-Varying Parameters with Parameter-Driven and Observation-Driven Models," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 97-110, March.
    11. Andrew Harvey & Rutger‐Jan Lange, 2018. "Modeling the Interactions between Volatility and Returns using EGARCH‐M," Journal of Time Series Analysis, Wiley Blackwell, vol. 39(6), pages 909-919, November.
    12. Michele Caivano & Andrew Harvey, 2014. "Time-series models with an EGB2 conditional distribution," Journal of Time Series Analysis, Wiley Blackwell, vol. 35(6), pages 558-571, November.
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    Cited by:

    1. Giuseppe Buccheri & Stefano Grassi & Giorgio Vocalelli, 2021. "Estimating Risk in Illiquid Markets: a Model of Market Friction with Stochastic Volatility," CEIS Research Paper 506, Tor Vergata University, CEIS, revised 08 Nov 2021.
    2. Harvey, A., 2021. "Score-driven time series models," Cambridge Working Papers in Economics 2133, Faculty of Economics, University of Cambridge.

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    More about this item

    Keywords

    Censored distributions; dynamic conditional score model; EGARCH models; logistic distribution; generalized t distribution;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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