Estimation of Dynamic Bivariate Mixture Models: Comments on Watanabe (2000)

Roman Liesenfeld and Jean-Francois Richard

Journal of Business & Economic Statistics, 2003, vol. 21, issue 4, 570-76

Abstract: This note compares a Bayesian Markov chain Monte Carlo approach implemented by Watanabe with a maximum likelihood ML approach based on an efficient importance sampling procedure to estimate dynamic bivariate mixture models. In these models, stock price volatility and trading volume are jointly directed by the unobservable number of price-relevant information arrivals, which is specified as a serially correlated random variable. It is shown that the efficient importance sampling technique is extremely accurate and that it produces results that differ significantly from those reported by Watanabe.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:21:y:2003:i:4:p:570-76

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