Some Cautionary Results Concerning Markov-Switching Models with Time-Varying Transition Probabilities

Martin Sola, Zacharias Psaradakis, Fabio Spagnolo and Nicola Spagnolo

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: This paper investigates some finite-sample issues that arise in the analysis of Markovswitching autoregressive models with time-varying probabilities. An extensive simulation study is undertaken to examine the small-sample properties of the maximum likelihood estimator and related statistics, and to investigate the implications of misspecification due to changes in the parameters of the transition mechanism.

Keywords: Markov switching; Monte Carlo experiments; Time-varying transition probabilities. (search for similar items in EconPapers)
Pages: 43 pages
Date: 2010-12
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2010-12

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