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Statistica Sinica 15(2005), 279-301





AUTOREGRESSIVE MODELS WITH PIECEWISE

CONSTANT VOLATILITY AND REGRESSION

PARAMETERS


Tze Leung Lai, Haiyan Liu and Haipeng Xing


Stanford University


Abstract: We introduce herein a new class of autoregressive models in which the regression parameters and error variances may undergo changes at unknown time points while staying constant between adjacent change-points. Assuming conjugate priors, we derive closed-form recursive Bayes estimates of the regression parameters and error variances. Approximations to the Bayes estimates are developed that have much lower computational complexity and yet are comparable to the Bayes estimates in statistical efficiency. We also address the problem of unknown hyperparameters and propose two practical methods for simultaneous estimation of the hyperparameters, regression parameters and error variances.



Key words and phrases: Bayesian inference, bounded complexity mixtures, change-point problems, filtering, sequential Monte Carlo, smoothing.


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