A numerical filtering method for linear state‐space models with Markov switching

Exact filtering in conditionally Markov switching hidden linear models

Article history: Received 3 September 2010 Accepted after revision 7 February 2011 Available online 12 April 2011 Presented by Paul Deheuvels In the classical setup of Markov switching hidden linear systems, the exact evaluation of optimal filters requires computations with complexity increasing exponentially with respect to the number of observations. In the present article, we propose a new f...

Methods for Markov-Switching Models

I develop a toolbox to analyze the statistical properties of multivariate Markov-switching models. I first derive analytical formulas for the evolution of first and second moments, taking into account the possibility of regime changes. The formulas are then used to characterize the evolution of expectations and uncertainty, the propagation of the shocks, the contribution of the shocks to the ov...

Fads Models with Markov Switching Hetroskedasticity: decomposing Tehran Stock Exchange return into Permanent and Transitory Components

Stochastic behavior of stock returns is very important for investors and policy makers in the stock market. In this paper, the stochastic behavior of the return index of Tehran Stock Exchange (TEDPIX) is examined using unobserved component Markov switching model (UC-MS) for the 3/27/2010 until 8/3/2015 period. In this model, stock returns are decomposed into two components; a permanent componen...

Estimating Markov and Semi-Markov Switching Linear Mixed Models with Individual-Wise Random Effects

We address the estimation of Markov (and semi-Markov) switching linear mixed models i.e. models that combine linear mixed models with individualwise random effects in a (semi-)Markovian manner. A MCEM-like algorithm whose iterations decompose into three steps (sampling of state sequences given random effects, prediction of random effects given the state sequence and maximization) is proposed. T...

Markov-Switching Models