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A note on testing regime switching assumption based on recurrence times

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  • Sen, Rituparna
  • Hsieh, Fushing

Abstract

By perceiving a regime switching model as an example of a nonlinear dynamical system, we employ recurrence time distribution of a chosen event to derive a test statistic for testing the null hypothesis of one regime versus the alternative of having two or more regimes involved in a time series. This simple chi-square type of statistic is compared with existing likelihood ratio based ones that are all, in general, very complex in construction. The power of our proposed test is rather satisfactory and the computing load required is significantly more economical.

Suggested Citation

  • Sen, Rituparna & Hsieh, Fushing, 2009. "A note on testing regime switching assumption based on recurrence times," Statistics & Probability Letters, Elsevier, vol. 79(24), pages 2443-2450, December.
  • Handle: RePEc:eee:stapro:v:79:y:2009:i:24:p:2443-2450
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    References listed on IDEAS

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    1. Jin Seo Cho & Halbert White, 2007. "Testing for Regime Switching," Econometrica, Econometric Society, vol. 75(6), pages 1671-1720, November.
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    Cited by:

    1. Joanna Janczura & Rafal Weron, 2012. "Inference for Markov-regime switching models of electricity spot prices," HSC Research Reports HSC/12/01, Hugo Steinhaus Center, Wroclaw University of Technology.
    2. Janczura, Joanna & Weron, Rafal, 2010. "Goodness-of-fit testing for regime-switching models," MPRA Paper 22871, University Library of Munich, Germany.

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