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Bayesian Markov Regime-Switching Models for Cointegration
Department of Statistical Science, Duke University, Durham, USA
School of Science and Information, Qingdao Agricultural University, Qingdao, China
- 1 Department of Statistical Science, Duke University, Durham, USA
- 2 School of Science and Information, Qingdao Agricultural University, Qingdao, China
Applied Mathematics·Volume 03 (2012)·Pages 1892–1897·Published 12 December 2012·DOI10.4236/am.2012.312259
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Abstract
This paper introduces a Bayesian Markov regime-switching model that allows the cointegration relationship between two time series to be switched on and off over time. Unlike classical approaches for testing and modeling cointegration, the Bayesian Markov switching method allows for estimation of the regime-specific model parameters via Markov Chain Monte Carlo and generates more reliable estimation. Inference of regime switching also provides important information for further analysis and decision making.
KeywordsCointegrationRegime-SwitchingBayesianMCMC
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