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    A note on the finite sample properties of the CLS method of TAR models

    Vavra, Marian (2012) A note on the finite sample properties of the CLS method of TAR models. Working Paper. Birkbeck College, University of London, London, UK.

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    Abstract

    In this paper we focus on the finite sample properties of the conditional least squares (CLS) method of threshold autoregressive (TAR) parameters under the following conditions: (a) non-Gaussian model innovations; (b) two types of asymmetry (i.e. deepness and steepness) captured by TAR models. It is clearly demonstrated that the finite sample properties of the CLS method of TAR parameters significantly differ depending on the type of asymmetry. The behavior of steepness-based models is very good compared to that obtained from deepness-based models. Therefore, extreme caution must be excercised to preliminary modelling steps, such as testing the type of asymmetry before estimating TAR models in practice. A mistake in this phase of modelling can, in turn, give rise to very problematic results.

    Metadata

    Item Type: Monograph (Working Paper)
    Keyword(s) / Subject(s): threshold autoregressive model, Monte Carlo method, bias, asymmetry
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 11 Jan 2013 13:09
    Last Modified: 05 Aug 2019 05:41
    URI: http://eprints.bbk.ac.uk/id/eprint/5953

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