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Maximum Likelihood Estimation in Markov Regime-Switching Models with Covariate-Dependent Transition Probabilities

Demian Pouzo, Zacharias Psaradakis, Martin Sola

arXiv 15 Dec 2016 · Mathematics — Statistics Theory · publishedEconometrica (2022) · 15 citations (OpenAlex)

arXiv:1612.04932 · PDF · DOI · OpenAlex · Extracted main text

Abstract

This paper considers maximum likelihood (ML) estimation in a large class of models with hidden Markov regimes. We investigate consistency of the ML estimator and local asymptotic normality for the models under general conditions which allow for autoregressive dynamics in the observable process, Markov regime sequences with covariate-dependent transition matrices, and possible model misspecification. A Monte Carlo study examines the finite-sample properties of the ML estimator in correctly specified and misspecified models. An empirical application is also discussed.

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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
1R. Douc, É. Moulines, and T. Rydén (2004) Asymptotic properties of the maximum likelihood estimator in autoregressive models with Markov regime0.9416483%
2H. White (1982) Maximum likelihood estimation of misspecified models0.92843100%
3R. Douc and E. Moulines (2012) Asymptotic properties of the maximum likelihood estimation in misspecified hidden Markov models0.87452100%
4P. Ailliot and F. Pène (2015) Consistency of the maximum likelihood estimate for non-homogeneous Markov-switching models0.81142100%
5P. J. Bickel, Y. Ritov, and T. Rydén (1998) Asymptotic normality of the maximum-likelihood estimator for general hidden Markov models0.79412550%
6A. J. Filardo (1994) Business-cycle phases and their transitional dynamics0.7547443%
7B. E. Hansen (1992) The likelihood ratio test under nonstandard conditions: Testing the Markov switching model of GNP0.7373367%
8A. Ang and G. Bekaert (2002) International asset allocation with regime shifts0.73732100%
9P. J. Bickel and Y. Ritov (1996) Inference in hidden Markov models i: Local asymptotic normality in the stationary case0.73732100%
10M. D. Gadea Rivas and G. Perez-Quiros (2015) The failure to predict the Great Recession–A view through the role of credit0.73732100%

Showing the top 10 of 67 scored citations.

Cited by, within the corpus

arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.

Citing paperIntensityMentionsSections
1On the Robustness of Mixture Models in the Presence of Hidden Markov Regimes with Covariate-Dependent Transition Probabilities1.00073
2Recursive Score and Hessian Computation in Regime-Switching Models0.40511