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Bayesian stochastic model specification search for seasonal and calendar effects

By Proietti Tommaso and Grassi Stefano

Abstract

We apply a recent methodology, Bayesian stochastic model specification search (SMSS), for the selection of the unobserved components (level, slope, seasonal cycles, trading days effects) that are stochastically evolving over time. SMSS hinges on two basic ingredients: the non-centered representation of the unobserved components and the reparameterization of the hyperparameters representing standard deviations as regression parameters with unrestricted support. The choice of the prior and the conditional independence structure of the model enable the definition of a very efficient MCMC estimation strategy based on Gibbs sampling. We illustrate that the methodology can be quite successfully applied to discriminate between stochastic and deterministic trends, fixed and evolutive seasonal and trading day effects.

Topics: C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models, C11 - Bayesian Analysis: General, C01 - Econometrics
Year: 2010
DOI identifier: 10.1201/b11823-25
OAI identifier: oai:mpra.ub.uni-muenchen.de:27305

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