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In this paper, we formulate a stereo matching algorithm with careful handling of disparity, discontinuity, and occlusion. The algorithm works with a global matching stereo model based on an energy-minimization framework. The global energy contains two terms, the data term and the smoothness term. The data term is first approximated by a color-weighted correlation, then refined in occluded and low-texture areas in a repeated application of a hierarchical loopy belief propagation algorithm. The experimental results are evaluated on the Middlebury data sets, showing that our algorithm is the top performer among all the algorithms listed there.