Quotation Kaufmann, Sylvia, Frühwirth-Schnatter, Sylvia. 2002. Bayesian analysis of switching ARCH-models. Journal of Time Series Analysis 23 (4): 425-458.




We consider a time series model with autoregressive conditional heteroscedasticity that is subject to changes in regime. The regimes evolve according to a multistate latent Markov switching process with unknown transition probabilities, and it is the constant in the variance process of the innovations that is subject to regime shifts. The joint estimation of the latent process and all model parameters is performed within a Bayesian framework using the method of Markov chain Monte Carlo (MCMC) simulation. We perform model selection with respect to the number of states and the number of autoregressive parameters in the variance process using Bayes factors and model likelihoods. To this aim, the model likelihood is estimated by the method of bridge sampling. The usefulness of the sampler is demonstrated by applying it to the data set previously used by Hamilton and Susmel (1994) who investigated models with switching autoregressive conditional heteroscedasticity using maximum likelihood methods. The paper concludes with some issues related to maximum likelihood methods, to classical model selection, and to potential straightforward extensions of the model presented here.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Time Series Analysis
Citation Index SCI
WU-Journal-Rating new FIN-A, VW-C, WH-B
Language English
Title Bayesian analysis of switching ARCH-models
Volume 23
Number 4
Year 2002
Page from 425
Page to 458
URL http://onlinelibrary.wiley.com/doi/10.1111/1467-9892.00271/abstract


Frühwirth-Schnatter, Sylvia (Details)
Kaufmann, Sylvia
Institute for Statistics and Mathematics IN (Details)
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