Hidden Markov Models, Markov Chains, Markov Switching, Markov Auto Regression, Maximum Likelihood.
we will look at how a ‘real’ AR(1) model looks like. Our model specification isn’t complete unless we also specify the probability (density) function of y_t. In the above model, we will assume y_t to be normally distributed with mean μ_cap_t, and constant variance σ²: The probability density