A Further Extension of Duration Dependent Models
The duration dependence of stock market cycles has been investigated using the Markov-switching model where the market conditions are unobservable. In the conventional modeling, restrictions are imposed that transition probability is a monotonic function of duration and the duration is truncated at a certain value. This paper proposes a model that is free from these arbitrary restrictions and nests the conventional models. In the model,the parameters that characterize the transition probability are formulated in the state space. Empirical results in several stock markets show that the duration structures differ greatly depending on countries. They are not necessarily monotonic functions of duration and, therefore, cannot be described by the conventional models.
|Date of creation:||Nov 2005|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi City, Tokyo 186|
Web page: http://www.ier.hit-u.ac.jp/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hst:hstdps:d05-127. 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: (Tatsuji Makino)
If references are entirely missing, you can add them using this form.