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The multi‐chain Markov switching model
Author(s) -
Otranto Edoardo
Publication year - 2005
Publication title -
journal of forecasting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.543
H-Index - 59
eISSN - 1099-131X
pISSN - 0277-6693
DOI - 10.1002/for.965
Subject(s) - markov chain , variable (mathematics) , state variable , econometrics , multivariate statistics , computer science , markov model , statistical physics , state (computer science) , variable order markov model , mathematics , machine learning , algorithm , physics , thermodynamics , mathematical analysis
In many real phenomena the behaviour of a certain variable, subject to different regimes, depends on the state of other variables or the same variable observed in other subjects, so the knowledge of the state of the latter could be important to forecast the state of the former. In this paper a particular multivariate Markov switching model is developed to represent this case. The transition probabilities of this model are characterized by the dependence on the regime of the other variables. The estimation of the transition probabilities provides useful information for the researcher to forecast the regime of the variables analysed. Theoretical background and an application are shown. Copyright © 2005 John Wiley & Sons, Ltd.