Regime switching long memory model for German stock returns

Heri Kuswanto*, Mutiah Salamah

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

A model which simultaneously accounts for long memory and regime switching has been applied to the German stock returns. The parameters estimation assumes that the transition probabilities are known. We overcome this assumption by using the estimated transition probabilities of Markov switching model as ex-ante information. The results show that the simultaneous model outperforms Markov switching model, and give better realization of ex-post forecasting.

Original languageEnglish
Pages (from-to)7-17
Number of pages11
JournalEuropean Journal of Economics, Finance and Administrative Sciences
Issue number15
Publication statusPublished - Jan 2009

Keywords

  • Long memory
  • Persistence
  • Regime switching
  • Simultaneous model

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