Theory and Inference for a Markov-Switching GARCH Model
We develop a Markov-switching GARCH model (MS-GARCH) wherein the conditional mean and variance switch in time from one GARCH process to another. The switching is governed by a hidden Markov chain. We provide sufficient conditions for geometric ergodicity and existence of moments of the process. Because of path dependence, maximum likelihood estimation is not feasible. By enlarging the parameter space to include the state variables, Bayesian estimation using a Gibbs sampling algorithm is feasible. We illustrate the model on SP500 daily returns.
|Date of creation:||2007|
|Contact details of provider:|| Postal: CP 8888, succursale Centre-Ville, Montréal, QC H3C 3P8|
Phone: (514) 987-8161
Web page: http://www.cirpee.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian Francq & Michel Roussignol & Jean-Michel Zakoïan, 1998.
"Conditional Heteroskedasticity Driven by Hidden Markov Chains,"
98-45, Centre de Recherche en Economie et Statistique.
- Christian Francq & Michel Roussignol & Jean-Michel Zakoian, 1998. "Conditional heteroskedasticity driven by hidden Markov chains," SFB 373 Discussion Papers 1998,86, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Francq, Christian & Zako an, Jean-Michel, 2002. "Comments On The Paper By Minxian Yang:," Econometric Theory, Cambridge University Press, vol. 18(03), pages 815-818, June.
- Gray, Stephen F., 1996. "Modeling the conditional distribution of interest rates as a regime-switching process," Journal of Financial Economics, Elsevier, vol. 42(1), pages 27-62, September.
- Tom Doan, "undated". "RATS programs to replicate Gray's 1996 Regime Switching GARCH paper," Statistical Software Components RTZ00080, Boston College Department of Economics.
- Dhiman Das & B.Hark Yoo, 2004. "A Bayesian MCMC Algorithm for Markov Switching GARCH models," Econometric Society 2004 North American Summer Meetings 179, Econometric Society.
- Dhiman Das & B.Hark Yoo, 2004. "A Bayesian MCMC Algorithm for Markov Switching GARCH models," Econometric Society 2004 Far Eastern Meetings 451, Econometric Society.
- Jan Henneke & Svetlozar Rachev & Frank Fabozzi & Metodi Nikolov, 2011. "MCMC-based estimation of Markov Switching ARMA-GARCH models," Applied Economics, Taylor & Francis Journals, vol. 43(3), pages 259-271.
- Dueker, Michael J, 1997. "Markov Switching in GARCH Processes and Mean-Reverting Stock-Market Volatility," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 26-34, January.
- Michael J. Dueker, 1995. "Markov switching in GARCH processes and mean reverting stock market volatility," Working Papers 1994-015, Federal Reserve Bank of St. Louis.
- Dhiman Das, 2004. "A Bayesian algorithm for a Markov Switching GARCH model," Computing in Economics and Finance 2004 30, Society for Computational Economics.
- Abramson, Ari & Cohen, Israel, 2007. "On The Stationarity Of Markov-Switching Garch Processes," Econometric Theory, Cambridge University Press, vol. 23(03), pages 485-500, June.
- Markus Haas, 2004. "A New Approach to Markov-Switching GARCH Models," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 2(4), pages 493-530.
- Bollen, Nicolas P. B. & Gray, Stephen F. & Whaley, Robert E., 2000. "Regime switching in foreign exchange rates: Evidence from currency option prices," Journal of Econometrics, Elsevier, vol. 94(1-2), pages 239-276.
- Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 307-333.
- Tom Doan, "undated". "RATS programs to estimate Hamilton-Susmel Markov Switching ARCH model," Statistical Software Components RTZ00083, Boston College Department of Economics.
- Yang, Minxian, 2000. "Some Properties Of Vector Autoregressive Processes With Markov-Switching Coefficients," Econometric Theory, Cambridge University Press, vol. 16(01), pages 23-43, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:lvl:lacicr:0733. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuel Paradis)
If references are entirely missing, you can add them using this form.