 Bayesian analysis of switching ARCH modelsSylvia Kaufmann and Sylvia Frühwirth‐schnatter Journal of Time Series Analysis, 2002, vol. 23, issue 4, 425-458 Abstract: 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. Date: 2002 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jtsera:v:23:y:2002:i:4:p:425-458 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Time Series Analysis is currently edited by M.B. Priestley More articles in Journal of Time Series Analysis from Wiley Blackwell |
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