Hamilton-Susmel JOE 1994 SWARCH model
Posted: Tue Aug 30, 2011 6:00 pmThese are replication files for Hamilton and Susmel(1994), "Autoregressive Conditional Heteroskedasticity and Changes in Regime," Journal of Econometrics, vol 64, pp 307-333. This is a slightly different setup from the SWARCH.RPF example file. In this case, the variance is g(S(t))h(t) where h(t) is a common ARCH process in the standardized squared residuals eps(t-k)^2/g(S(t-k)). The difference between this and the SWARCH example is that in the SWARCH (in effect) the divisor in the standardization is g(S(t)) rather than g(S(t-k)). In the Hamilton-Susmel model, this makes the likelihood at t dependent upon current and lagged regimes as in the MS-VAR. The SWARCH.RPF example actually uses the model as described in Cai(1994), “A Markov Model of Switching-Regime ARCH,” Journal of Business and Economic Statistics, vol 12, no. 3, 309–316.
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