General Autoregressive Modelling of Markov Chains

A Berchtold

Working Papers from Theory and Mathematics of the Economy and the Society

Abstract: The reduction of the number of parameters in high-order Markov chain already inspired several articles. In particular, Raftery proposed an autoregressive modelling which utilizes the same transition matrix, with a coefficient, for every lag. In this paper, we show that a model of the same type, but utilizing different matrices, gives best results and is not harder to estimate, even when the number of data is small. A numerical illustration confirms the theoretical results.

Keywords: Markov chain; General Transition Matrices (S-Matrices); General Autoregressive Modelling (GAM); Limit theorem; Quality of modelling. (search for similar items in EconPapers)
Date: 1995
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