Specification Testing of Markov Switching Models

Robert Breunig, Robert Breunig, Serinah Najarian, Adrian Pagan

    Research output: Contribution to journalArticle

    Abstract

    This paper proposes a set of formal tests to address the goodness-of-fit of Markov switching models. These formal tests are constructed as tests of model consistency and of both parametric and non-parametric encompassing. The formal tests are then combined with informal tests using simulation in combination with non-parametric density and conditional mean estimation. The informal tests are shown to be useful in shedding light on the failure (or success) of the encompassing tests. Several examples are provided.
    Original languageEnglish
    Pages (from-to)703-726
    JournalOxford Bulletin of Economics and Statistics
    Volume65
    Issue numberS1
    DOIs
    Publication statusPublished - 2003

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