Dueker (1997) output with fixed mean

[zy761]

Dear Tom,

I estimate the Dueker (1997)'s paper using my RATs 8.2. It works fine, but when it comes to the last part of the program to estimate the model with fixed means, I cannot get the value of p1 and p2. In fact, p1 and p2 are both zero. Could you help me with this? Thanks a lot for your help in advance!

[TomDoan]

Which of the five programs are you talking about?

[zy761]

Dear Tom,

Sorry, the file I am using is SWGARCH_NF.rpf

[TomDoan]

That one (of the twenty or so combinations in the paper) apparently isn't converging given the guess values. That looks like it's the only model that uses a fixed mean and switches the variance only and I can't seem to find any way to make that have anything other than a corner solution where the lower variance state has 0 retention probability. You can see what happens to that as you reduce the .1 in the below to .01 and .001.

nonlin(parmset=nomeans) mu(2)=mu(1) p(1,1)=.1

So basically, it collapses to a one-regime model.

[zy761]

Dear Tom,

Thanks for your reply. But I have another question when reading the output: How to intepret the P(1,1) and P(1,2)? Does P(i,j) suggest the probability of switching from j to i? Then how to calculate the value of P(2,1) and P(2,2)?

[TomDoan]

Dear Tom,

Thanks for your reply. But I have another question when reading the output: How to intepret the P(1,1) and P(1,2)? Does P(i,j) suggest the probability of switching from j to i? Then how to calculate the value of P(2,1) and P(2,2)?

Subtract from 1