Theory and Applications of TAR Model with Two Threshold Varialbles
Haiqiang Chen, Terence Tai-Leung Chong, Jushan Bai
#002152 20131014 (published) Views:146
A growing body of threshold models has been developed over the past two decades to capture the nonlinear movement of ﬁnancial time series. Most of these models, however, contain a single threshold variable only. In many empirical applications, models with two or more threshold variables are needed. This article develops a new threshold autoregressive model which contains two threshold variables. A likelihood ratio test is proposed to determine the number of regimes in the model. The ﬁnite-sample performance of the estimators is evaluated and an empirical application is provided.
Keywords: Bootstrapping; Likelihood ratio test; Misspeciﬁcation; Threshold autoregressive model.