A switching model with flexible threshold variable: With an application to nonlinear dynamics in stock returns

Daniele Massacci

Economics Letters, 2013, vol. 119, issue 2, 199-203

Abstract: This paper proposes an extension to threshold-type switching models that lets the threshold variable be a linear combination of exogenous variables with unknown coefficients. An algorithm to estimate the model’s parameters by least squares is provided and the validity of the methodological framework is assessed by a Monte Carlo study. The empirical usefulness of the proposed specification is illustrated by an application to US stock returns.

Keywords: Threshold model; Flexible threshold variable; Stock returns (search for similar items in EconPapers)
JEL-codes: C13 C22 G12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:119:y:2013:i:2:p:199-203

DOI: 10.1016/j.econlet.2013.02.031

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