We investigate whether fluctuations in U.S. inflation rates are better described by infrequently occurring large shocks or by frequently occurring small shocks. We estimate a model that encompasses the two hypotheses within the framework of non-Gaussian state-space models. Our results indicate...

We investigate persistence in CRSP monthly excess stock returns, using a state space model with stable disturbances. The non-Gaussian state space model with volatility persistence is estimated by maximum likelihood, using the optimal filtering algorithm given by Sorenson and Alspach (1971). The...

Most economic time series indicate non-normality in the form of either occasional big shocks or marked changes in the level of the series. In this paper, a univariate state-space model with infinite variance symmetric stable shocks is used to model the U.S. inflation rate via the...