Parameterisation and Efficient MCMC Estimation of Non-Gaussian State Space Models

Chris M Strickland (), Gael Margaret Martin and Catherine S Forbes ()

No 22/06, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: The impact of parameterisation on the simulation efficiency of Bayesian Markov chain Monte Carlo (MCMC) algorithms for two non-Gaussian state space models is examined. Specifically, focus is given to particular forms of the stochastic conditional duration (SCD) model and the stochastic volatility (SV) model, with four alternative parameterisations of each model considered. A controlled experiment using simulated data reveals that relationships exist between the simulation efficiency of the MCMC sampler, the magnitudes of the population parameters and the particular parameterisation of the state space model. Results of an empirical analysis of two separate transaction data sets for the SCD model, as well as equity and exchange rate data sets for the SV model, are also reported. Both the simulation and empirical results reveal that substantial gains in simulation efficiency can be obtained from simple reparameterisations of both types of non-Gaussian state space models.

Keywords: Bayesian methodology; stochastic volatility; durations; non-centred in location; non-centred in scale; inefficiency factors. (search for similar items in EconPapers)
JEL-codes: C11 C22 G1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mst
Date: 2006-12
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Related works:
Journal Article: Parameterisation and efficient MCMC estimation of non-Gaussian state space models (2008)
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