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Analysis Of The Likelihood Function For Markov-Switching Var(Ch) Models

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  • Maddalena Cavicchioli

Abstract

type="main" xml:id="jtsa12085-abs-0001"> In this work, we give simple matrix formulae for maximum likelihood estimates of parameters in a broad class of vector autoregressions subject to Markovian changes in regime. This allows us to determine explicitly the asymptotic variance–covariance matrix of the estimators, giving a concrete possibility for the use of the classical testing procedures. In the context of multivariate autoregressive conditional heteroskedastic models with changes in regime, we provide formulae for the analytic derivatives of the log likelihood. Then we prove the consistency of some maximum likelihood estimators and give some formulae for the asymptotic variance of the different estimators.

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  • Maddalena Cavicchioli, 2014. "Analysis Of The Likelihood Function For Markov-Switching Var(Ch) Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 35(6), pages 624-639, November.
    • Handle: RePEc:bla:jtsera:v:35:y:2014:i:6:p:624-639
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    References listed on IDEAS

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    1. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(1), pages 122-150, February.
    2. Francq, C. & Zakoian, J. -M., 2001. "Stationarity of multivariate Markov-switching ARMA models," Journal of Econometrics, Elsevier, vol. 102(2), pages 339-364, June.
    3. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
    4. Weiss, Andrew A., 1986. "Asymptotic Theory for ARCH Models: Estimation and Testing," Econometric Theory, Cambridge University Press, vol. 2(1), pages 107-131, April.
    5. Kim, Chang-Jin, 1994. "Dynamic linear models with Markov-switching," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 1-22.
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    Cited by:

    1. Cavicchioli, Maddalena, 2023. "Statistical analysis of Markov switching vector autoregression models with endogenous explanatory variables," Journal of Multivariate Analysis, Elsevier, vol. 196(C).
    2. Cavicchioli, Maddalena, 2017. "Asymptotic Fisher information matrix of Markov switching VARMA models," Journal of Multivariate Analysis, Elsevier, vol. 157(C), pages 124-135.
    3. Maddalena Cavicchioli, 2020. "A note on the asymptotic and exact Fisher information matrices of a Markov switching VARMA process," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 29(1), pages 129-139, March.
    4. Cavicchioli, Maddalena, 2023. "Impulse response function analysis for Markov switching var models," Economics Letters, Elsevier, vol. 232(C).
    5. Kangogo, Moses & Volkov, Vladimir, 2022. "Detecting signed spillovers in global financial markets: A Markov-switching approach," International Review of Financial Analysis, Elsevier, vol. 82(C).
    6. BenSaïda, Ahmed & Litimi, Houda & Abdallah, Oussama, 2018. "Volatility spillover shifts in global financial markets," Economic Modelling, Elsevier, vol. 73(C), pages 343-353.
    7. Cavicchioli, Maddalena, 2024. "A matrix unified framework for deriving various impulse responses in Markov switching VAR: Evidence from oil and gas markets," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).
    8. Maddalena Cavicchioli, 2020. "Invertibility and VAR Representations of Time-Varying Dynamic Stochastic General Equilibrium Models," Computational Economics, Springer;Society for Computational Economics, vol. 55(1), pages 61-86, January.
    9. Nan Li & Simon S. Kwok, 2021. "Jointly determining the state dimension and lag order for Markov‐switching vector autoregressive models," Journal of Time Series Analysis, Wiley Blackwell, vol. 42(4), pages 471-491, July.

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