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A mixture autoregressive model based on Gaussian and Student’s t-distributions

Virolainen Savi ()
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Virolainen Savi: Faculty of Social Sciences, University of Helsinki, P. O. Box 17, Helsinki, FI–00014, Finland

Studies in Nonlinear Dynamics & Econometrics, 2022, vol. 26, issue 4, 559-580

Abstract: We introduce a new mixture autoregressive model which combines Gaussian and Student’s t mixture components. The model has very attractive properties analogous to the Gaussian and Student’s t mixture autoregressive models, but it is more flexible as it enables to model series which consist of both conditionally homoscedastic Gaussian regimes and conditionally heteroscedastic Student’s t regimes. The usefulness of our model is demonstrated in an empirical application to the monthly U.S. interest rate spread between the 3-month Treasury bill rate and the effective federal funds rate.

Keywords: interest rate spread; mixture model; nonlinear autoregression; regime switching (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/snde-2020-0060

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