here is the model
y*t = xtβ + εt
yt = y*t - α1 if y*t> α1
yt=0 if α1< y*t< α2
yt = y*t- α2 if y*t< α2
y*t is the latent variable
with α1< 0 and α2>0 and ε i.i.d, residuals of the estimation with
variance σj². The parameters β, α1 α2 and σ are solved by maximising
a log-likelihood function.
Ln L = ∑ ln (1/2πσj²)1/2 -∑(yjt+α1j-βjxt)²/2 σj² +
t€ψ1
∑ ln (1/2πσj²)1/2 -∑(yjt+α2j-βjxt)²/2 σj²+
t€ψ2
∑ln[Ф((α2j-βjxt)/ σj)- Ф((α2j-βjxt)/ σj)]
t€ψ3
As I've told you my principal problem is on how to find out
consistent starting points, any help would be highly appreciated !!!
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