Some Cautionary Results Concerning Markov-Switching Models with Time-Varying Transition Probabilities
AbstractThis paper investigates some finite-sample issues that arise in the analysis of Markovswitching autoregressive models with time-varying probabilities. An extensive simulation study is undertaken to examine the small-sample properties of the maximum likelihood estimator and related statistics, and to investigate the implications of misspecification due to changes in the parameters of the transition mechanism.
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Bibliographic InfoPaper provided by Universidad Torcuato Di Tella in its series Department of Economics Working Papers with number 2010-12.
Length: 43 pages
Date of creation: Dec 2010
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Markov switching; Monte Carlo experiments; Time-varying transition probabilities.;
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