This paper presents the R package MitISEM, which provides an automatic and flexible method to approximate a non-elliptical target density using adaptive mixtures of Student-t densities, where only a kernel of the target density is required. The approximation can be used as a candidate density in Importance Sampling or Metropolis Hastings methods for Bayesian inference on model parameters and probabilities. The package provides also an extended MitISEM algorithm, ‘sequential MitISEM’, which substantially decreases the computational time when the target density has to be approximated for increasing data samples. This occurs when the posterior distribution is updated with new observations and/or when one computes model probabilities using predictive likelihoods. We illustrate the MitISEM algorithm using three canonical statistical and econometric models that are characterized by several types of non-elliptical posterior shapes and that describe well-known data patterns in econometrics and finance. We show that the candidate distribution obtained by MitISEM outperforms those obtained by ‘naive’ approximations in terms of numerical efficiency. Further, the MitISEM approach can be used for Bayesian model comparison, using the predictive likelihoods.

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Tinbergen Institute
hdl.handle.net/1765/37313
Tinbergen Institute Discussion Paper Series
Discussion paper / Tinbergen Institute
Erasmus School of Economics

Basturk, N, Hoogerheide, L.F, Opschoor, A, & van Dijk, H.K. (2012). The R Package MitISEM: Mixture of Student-t Distributions using Importance Sampling Weighted Expectation Maximization for Efficient and Robust Simulation (No. TI 12-096/III). Discussion paper / Tinbergen Institute (pp. 1–30). Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/37313