Simulation Based Estimation of Some Factor Models in Econometrics.
by
Adrian R. Pagan and Vance L. Martin.
May 1996
Department of Economics. University of Melbourne. Parkville Victoria
3052 Australia
ABSTRACT
A procedure for computing the parameters of latent multifactor models
in econometrics is proposed based on indirect estimation methods. The approach
circumvents many of the difficulties associated with direct estimation
of this class of models using maximum likelihood methods. Applications
of the methodology are made to Hamilton's (1989) well known model of unobserved
states and to both single and multifactor models of the term structure.
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