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Maximum Likelihood Estimation in Possibly Misspeci ed Dynamic Models with Time-Inhomogeneous Markov Regimes

Author

Listed:
  • Demian Pouzo
  • Zacharias Psaradakis
  • Martin Sola
Abstract
This paper considers maximum likelihood (ML) estimation in a large class of models with hidden Markov regimes. We investigate consistency and local asymptotic normality of the ML estimator under general conditions which allow for autoregressive dynamics in the observable process, time-inhomogeneous Markov regime sequences, and possible model misspeci cation. A Monte Carlo study examines the nite-sample properties of the ML estimator. An empirical application is also discussed. Key words and phrases: Autoregressive model; consistency; hidden Markov model; Markov regimes; maximum likelihood; local asymptotic normality; misspeci ed models; time-inhomogenous Markov chain.

Suggested Citation

  • Demian Pouzo & Zacharias Psaradakis & Martin Sola, 2016. "Maximum Likelihood Estimation in Possibly Misspeci ed Dynamic Models with Time-Inhomogeneous Markov Regimes," Department of Economics Working Papers 2016_04, Universidad Torcuato Di Tella.
    • Handle: RePEc:udt:wpecon:2016_04
    as

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    File URL: https://www.utdt.edu/download.php?fname=_150309052784567800.pdf
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    References listed on IDEAS

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    14. Psaradakis, Zacharias & Sola, Martin, 1998. "Finite-sample properties of the maximum likelihood estimator in autoregressive models with Markov switching," Journal of Econometrics, Elsevier, vol. 86(2), pages 369-386, June.
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    Cited by:

    1. Psaradakis, Zacharias & Sola, Martin, 2024. "Markov-Switching Models with State-Dependent Time-Varying Transition Probabilities," Econometrics and Statistics, Elsevier, vol. 29(C), pages 49-63.
    2. repec:udt:wpecon:2017_1 is not listed on IDEAS
    3. Yonekura, Shouto & Beskos, Alexandros & Singh, Sumeetpal S., 2021. "Asymptotic analysis of model selection criteria for general hidden Markov models," Stochastic Processes and their Applications, Elsevier, vol. 132(C), pages 164-191.
    4. Feng Lingbing & Shi Yanlin, 2020. "Markov regime-switching autoregressive model with tempered stable distribution: simulation evidence," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 24(1), pages 1-27, February.

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    More about this item

    Keywords

    Autoregressive model; consistency; hidden Markov model; Markov regimes; maximum likelihood; local asymptotic normality; misspeci ed models; time-inhomogenous Markov chain.;
    All these keywords.

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