2 edition of **Regime switching with time-varying transition probabilities** found in the catalog.

Regime switching with time-varying transition probabilities

Francis X. Diebold

- 1 Want to read
- 19 Currently reading

Published
**1993**
by Federal Reserve Bank of Philadelphia, Economic Research Division in Philadelphia
.

Written in English

**Edition Notes**

Statement | Francis X. Diebold, Joon-Haeng Lee, Gretchen C. Weinbach. |

Series | Economic research working paper series / Federal Reserve Bank of Philadelphia, Economic Research Division -- no.12, Economic research working paper (Federal Reserve Bank of Philadelphia, Economic Research Division) -- no.12. |

Contributions | Lee, Joon-Haeng., Weinbach, Gretchen C. |

ID Numbers | |
---|---|

Open Library | OL17145129M |

Abstract. We examine model specification in regime-switching continuous-time diffusions for modeling S&P Volatility Index (VIX). Our investigation is carried out under two nonlinear diffusion frameworks, the NLDCEV and the CIRCEV frameworks, and our focus is on the nonlinearity in regime-dependent drift and diffusion terms, the switching components, and the endogeneity in regime : Ruijun Bu. time varying. It spikes upward in the high volatility state, only to decline more gradually in the subsequent periods. However, out-of-sample predictability of the value premium is close to nonexistent. We study time variations of the expected value premium using a two-state Markov switching framework with time-varying transition probabilities.

We propose a novel Markov regime-switching Poisson regression model with time-varying transition probabilities to rationalize wave-like patterns in the intensity rate of industry-specific merger activity. Empirically, we show that merger waves vary significantly across industries, both in terms of their timing and by: 1. The model also delivers (conditiona l) probabilities for being (staying) in either regime, which may help interpret oil price fluctuations -- and inform deliberations on the adequate policy response -- in real-time. Keywords: Regime Switching models, inflation, inflation expectations, oil Cited by: 1.

III. Threshold and Markov-Switching Models of Regime Change This section describes the threshold and Markov-switching approaches to modeling regime-switching using a specific example. In particular, suppose we are interested in modeling the sample path of a time series, T {y t} t 1, where y t is a scalar, stationary, random variable. The unrestricted model is the time-varying transition probability Markov-switching model of Goldfeld and Quandt (), Diebold, Lee and Weinbach () and Filardo (). When the transition probabilities are not influenced by St−1, we have the time-varying transition probability independent switching model of Goldfeld and Quandt ().File Size: KB.

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Therefore, we implemented an extended Markov-Switching estimation procedure with time-varying transition probabilities in Markov chain, as explained by Filardo () and Diebold et al.

(), in. Filardo () relaxes this assumption and allows for time-varying transition probabilities (TVP) in a Markov switching autoregressive model. Such probabilities are modeled as functions of certain conditioning variables (i.e., the state variables), which are found to be relevant in explaining the regime switches (Filardo and Gordon,Kim Cited by: 5.

Regime switching with time-varying transition probabilities Francis X Diebold, Joon-Haeng Lee and Gretchen C. Weinbach* Markov switchmg model is useful Of the potential it Offers for capturing but recurrent regime shifts in a simple dynamic econometric Existing however, restrlCt the to over that is, Of one regime to the.

Model 1: the constant (static) transition probabilities regime switching model. The results for the regime switching model with static transition probabilities and a static −2% target in terms of minimum required return are reported in column four in Table No abstract is available for this item.

Francis X. Diebold & Joon-Haeng Lee & Gretchen C. Weinbach, "Regime switching with time-varying transition probabilities," Working PapersFederal Reserve Bank of Philadelphia, revised Handle: RePEc:fip:fedpwp Regime switching with time-varying transition probabilities.

In Nonstationary Time Series Analysis and Cointegration, ed. Hargreaves. Oxford: Oxford University by: The MATLAB code presented here is for estimating a Markov Regime Switching Model with time varying transition probabilities.

The code is developed by Zhuanxin Ding based on the original code by Marcelo Perlin for estimating a Markov Regime Switching Model with constant transition probability s: 3. This memo explains how to use the MATLAB code for estimating a Markov Regime Switching Model with time varying transition probabilities.

The code is developed by Zhuanxin Ding based on the original code by Marcelo Perlin for estimating a Markov Regime Switching Model Cited by: 9. Request PDF | Time‐Varying Transition Probabilities for Markov Regime Switching Models | We propose a new Markov switching model with time-varying transitions probabilities.

The novelty of our. Markov state switching models are a type of specification which allows for the transition of states as an intrinsic property of the econometric model. The MATLAB Package for Markov Regime Switching Models. 39 Pages Posted: 26 Nov Last An Implementation of Markov Regime Switching Model with Time Varying Transition Probabilities in Cited by: Endogenous regime switching has also been studied from an econometric standpoint.

Fol-lowing the seminal paper byHamilton(),Filardo() andFilardo and Gordon() have estimated Markov switching regressions with time-varying transition probabilities. More. Downloadable. This paper proposes a model which allows for discrete stochastic breaks in the time varying transition probabilities of Markov-switching models with autoregressive dynamics.

An extensive simulation study is undertaken to examine the properties of the maximum-likelihood estimator and related statistics, and to investigate the implications of misspecification due to unaccounted Cited by: 1.

Markov-switching with constant transition probabilities (dependent on the prior or lagged regime). Markov-switching with time-varying transition probabilities (the regime is a function of other variables2).

2the variables must be conditionally uncorrelated with the regime of the Markov process (Filardo ())File Size: KB. Time Varying Transition Probabilities for Markov Regime Switching Models Marco Bazzi (a), Francisco Blasques b Siem Jan Koopman (b;c), Andr e Lucas b (a) University of Padova, Italy (b) VU University Amsterdam and Tinbergen Institute, The Netherlands (c) CREATES, Aarhus University, Denmark Abstract We propose a new Markov switching model with time varying probabilities for the.

In this paper, a Markov regime-switching model with time-varying transition probabilities is developed to identify asset price bubbles in the S&P index.

The model nests two different methodologies; a state-dependent regime-switching model and a Markov regime-switching model. Three bubble regimes areCited by: 1. duration of a regime is time-varying. Filardo and Gordon () add time-varying ex-pected regime durations by way of time-varying transition probabilities.

In general, this covariate approach to time-varying expected durations requires an auxiliary model to pre-dict the future evolution of the Z covariates.

Lam () uses the regime durations as. An Implementation of Markov Regime Switching Model with Time Varying Transition Probabilities in Matlab By Zhuanxin Ding, Ph.D. First Version: J This Version: J Abstract This memo explains how to use the MATLAB code for estimating a Markov Regime Switching Model with time varying transition by: 9.

Regime switching with time-varying transition probabilities. (Working Papers ), Federal Reserve Bank of Philadelphia. (Working Papers ), Federal Reserve Bank of Philadelphia. Donnenfeld S., & Zilcha, I. ().Cited by: 2. This paper presents a regime-switching model of the yield curve with two states.

One is a normal state, the other is a zero-bound state that represents the case when the monetary policy target rate is at its zerolowerbound for a prolongedperiod, as the U.S. economyhas been since December The model delivers estimates of the time-varying File Size: KB.

A Univariate Model of Time-Varying Expected Stock Returns A. The Econometric Framework We adopt the Perez-Quiros and Timmermann () Markov switching framework with time-varying transition probabilities based on prior work of Hamilton () and Gray ().

The Markov switching framework allows for state dependence in expected stock returns. Outline 1 When we use Markov-Switching Regression Models 2 Introductory concepts 3 Markov-Switching Dynamic Regression Predictions State probabilities predictions Level predictions State expected durations Transition probabilities 4 Markov-Switching AR Models (StataCorp) Markov-switching regression in Stata October 22 3 / 1File Size: KB.T1 - Time Varying Transition Probabilities for Markov Regime Switching Models.

AU - Bazzi, M. AU - Blasques Albergaria Amaral, F. AU - Koopman, S.J. AU - Lucas, A. PY - Y1 - N2 - We propose a new Markov switching model with time-varying transitions by: A key diﬀerence between the various regime-switching models lies in the stochastic structure of the state variables.

For instance, the state of the unobserved process can be modeled by a discrete time/discrete space Markov chain, which can have either ﬁxed or time-varying transition probabilities, or by an independent stochastic 1.