By incorporating the Harvey accumulator into the large approximate dynamic factor framework of Doz et al. (2006), we are able to construct a coincident index of financial conditions from a large unbalanced panel of mixed frequency financial indicators. We relate our financial conditions index,...

This paper examines maximum likelihood estimation via hill climbing and the expectations maximization (EM) algorithm in the context of Hamilton's Markov switching framework. The techniques are explained in detail and are followed by a discussion of both analytic and computational issues. Both...

Markov models introduce persistence in the mixture distribution. In time series analysis, the mixture components relate to different persistent states characterizing the state-specific time series process. Model specification is discussed in a general form. Emphasis is put on the functional form...

The main purpose of this paper is to study the problem created by the lack of information about the credit history of some debtors in the databases used to develop credit scoring models and the use of information about behavior compiled by a credit risk register as a potential solution to the...

A regression model is considered where earnings are explained by schooling and ability. It is assumed that schooling is measured with error and that there are no data on ability. Regressing earnings on observed schooling then yields an estimate of the return to schooling that is subject to...

This paper applies the recently developed maximum-likelihood-panel cointegration method of Larsson and Lyhagen (2007) to test the strong PPP hypothesis during the recent ‡oat period on data for the G7 countries. This method is robust in several important dimensions relative to previous methods,...

This paper is concerned with statistical inference and model evaluation in possibly misspecified and unidentified linear asset-pricing models estimated by maximum likelihood and one-step generalized method of moments. Strikingly, when spurious factors (that is, factors that are uncorrelated with...

This paper derives explicit expressions for the asymptotic variances of the maximum likelihood and continuously updated GMM estimators under potentially misspecified models. The proposed misspecification-robust variance estimators allow the researcher to conduct valid inference on the model...

This paper studies some seemingly anomalous results that arise in possibly misspecified and unidentified linear asset-pricing models estimated by maximum likelihood and one-step generalized method of moments (GMM). Strikingly, when useless factors (that is, factors that are independent of the...

DSGE models are typically estimated using Bayesian methods, but a researcher may want to estimate a DSGE model with full information maximum likelihood (FIML) so as to avoid the use of prior distributions. A very robust algorithm is needed to find the global maximum within the relevant parameter...