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A likelihood ratio test for stationarity of rating transitions
[journal article]
Abstract "We study the time-stationarity of rating transitions, modelled by a time-continuous discrete-state Markov process and derive a likelihood ratio test. For multiple Markov processes from a multiplicative intensity model, maximum likelihood parameter estimates can be written as martingale transform of... view more
"We study the time-stationarity of rating transitions, modelled by a time-continuous discrete-state Markov process and derive a likelihood ratio test. For multiple Markov processes from a multiplicative intensity model, maximum likelihood parameter estimates can be written as martingale transform of the processes, counting transitions between the rating states, so that the profile partial likelihood ratio is asymptotically χ2-distributed. An application to an internal rating data set reveals highly significant instationarity." [author's abstract]... view less
Classification
Economic Statistics, Econometrics, Business Informatics
Free Keywords
Stationarity; Multiple markov process; Counting process; Likelihood ratio; Multiple spells
Document language
English
Publication Year
2009
Page/Pages
p. 188-194
Journal
Journal of Econometrics, 155 (2009) 2
DOI
https://doi.org/10.1016/j.jeconom.2009.10.016
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)