We present an algorithm, based on a differential evolution MCMC method, for Bayesian inference in AR-GARCH models subject to an unknown number of structural breaks at unknown dates. Break dates are directly treated as parameters and the number of breaks is determined by the marginal likelihood...

Dynamic volatility and correlation models with fixed parameters are restrictive for time series subject to breaks. GARCH and DCC models with changing parameters are specified using the sticky infinite hidden Markov-chain framework. Estimation by Bayesian inference determines the adequate number...

Markov-switching models are usually specified under the assumption that all the parameters change when a regime switch occurs. Relaxing this hypothesis and being able to detect which parameters evolve over time is relevant for interpreting the changes in the dynamics of the series, for...

This paper builds on a simple unified representation of shrinkage Bayes estimators based on hierarchical Normal-Gamma priors. Various popular penalized least squares estimators for shrinkage and selection in regression models can be recovered using this single hierarchical Bayes formulation....

In this paper, we forecast EU-area inflation with many predictors using time-varying parameter models. The facts that time-varying parameter models are parameter-rich and the time span of our data is relatively short motivate a desire for shrinkage. In constant coefficient regression models, the...

GARCH volatility models with fixed parameters are too restrictive for long time series due to breaks in the volatility process. Flexible alternatives are Markov-switching GARCH and change-point GARCH models. They require estimation by MCMC methods due to the path dependence problem. An unsolved...

Chapter written for the Handbook of Research Methods and Applications on Empirical Macroeconomics, edited by Nigar Hashimzade and Michael Thornton, forth- coming in 2012 (Edward Elgar Publishing). This chapter presents an introductory review of Bayesian methods for research in empirical...

This paper develops methods for automatic selection of variables in Bayesian vector autoregressions (VARs) using the Gibbs sampler. In particular, I provide computationally efficient algorithms for stochastic variable selection in generic linear and nonlinear models, as well as models of large...

In recent years multivariate models for asset returns have received much attention, in particular this is the case for models with time varying volatility. In this paper we consider models of this class and examine their potential when it comes to option pricing. Specifically, we derive the risk...

Change-point models are useful for modeling time series subject to structural breaks. For interpretation and forecasting, it is essential to estimate correctly the number of change points in this class of models. In Bayesian inference, the number of change points is typically chosen by the...