Kernel-Based Indirect Inference
The class of parametric dynamic latent variable models is becoming increasingly popular in finance and economics. Latent factor models, switching regimes models, stochastic volatility models, and dynamic disequilibrium models are only a few examples of this class of model. Inference in this class may be difficult since the computation of the likelihood function requires integrating out the unobservable components and calculating very high dimensional integrals. We propose an estimation procedure that could be applied to any dynamic latent model. The approach is based on the indirect inference principle and, in order to capture the dynamic features of these models, the binding functions are conditional expectations of functions of the endogenous variables given their past values. These conditional expectations are estimated by a nonparametric kernel-based approach. Unlike the indirect inference method, no optimization step is involved in the computation of the binding function and the approach is useful when no convenient auxiliary model is available. In spite of the nonparametric feature of the approach, the estimator is consistent and its convergence rate may be arbitrarily close to the classical parametric one. Moreover, a scoring method to select the best binding functions is proposed. Finally, some Monte Carlo experiments for factor ARCH and GARCH models show the feasibility of the approach. , .
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 1 (2003)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK|
Fax: 01865 267 985
Web page: http://jfec.oxfordjournals.org/
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:jfinec:v:1:y:2003:i:3:p:297-326. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.