Regime switching long memory model for German stock returns

Heri Kuswanto; Mutiah Salamah

Regime switching long memory model for German stock returns

Heri Kuswanto^*
, Mutiah Salamah

^*Corresponding author for this work

Institut Teknologi Sepuluh Nopember

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	7-17
Number of pages	11
Journal	European Journal of Economics, Finance and Administrative Sciences
Issue number	15
Publication status	Published - Jan 2009

Keywords

Long memory
Persistence
Regime switching
Simultaneous model

Cite this

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title = "Regime switching long memory model for German stock returns",

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.",

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author = "Heri Kuswanto and Mutiah Salamah",

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AU - Kuswanto, Heri

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AB - 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.

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KW - Persistence

KW - Regime switching

KW - Simultaneous model

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Regime switching long memory model for German stock returns

Abstract

Keywords

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