Sequential Monte Carlo estimation for Present-Value model

Yong Li, Zhusheng Lou, Qiaosen Zhang and Mingzhi Zhang

Applied Economics Letters, 2022, vol. 29, issue 18, 1702-1708

Abstract: Multi-modal likelihood function of Present-Value model makes traditional estimation approach sensitive to initial values. In this article, we apply Sequential Monte Carlo (SMC) approach in the estimation of Present-Value model, since it is robust to multi-modality. Simulation studies show that SMC approach is preferable than Simulated Annealing (SA) since the latter is sensitive to initial values. Finally, we find that stock market return in the U.S. is more persistent than dividend growth rate according to our empirical study.

Date: 2022
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DOI: 10.1080/13504851.2021.1959512

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