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A note on maximum likelihood estimation of the rational expectations model of the term structure

โœ Scribed by Thomas J. Sargent


Book ID
116124569
Publisher
Elsevier Science
Year
1979
Tongue
English
Weight
817 KB
Volume
5
Category
Article
ISSN
0304-3932

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We show that a non-identifiability problem can occur when one attempts to estimate the degrees of freedom and the unstructured covariance matrix simultaneously in a Gaussian-inverted Wishart model, using the maximum likelihood approach. However, the EM algorithm may falsely converge to give finite e