Regime switching models: real or spurious long memory?

Dominique Guegan () and Stéphanie Rioublanc ()
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Dominique Guegan: IDHE, https://cv.archives-ouvertes.fr/dominique-guegan
Stéphanie Rioublanc: IDHE

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: In this paper, we analyze the possible confusion in terms of long memory behavior of the autocorrelation function of a Markov switching model. Such a model is known to have a short memory behavior. Analyzing the value of sum of the transition probabilities and the number of switches inside such a model, we show their impact to create long memory. The ability of the true Markov switching model to predict is compared with the forecasts obtained from a long memory process adjusted on data derived from the former model. It is shown that, in certain cases, this spurious long memory behavior can be benefit to get better forecasts

Keywords: Markov switching processes; FARMA processes; forecasts; jumps (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2005-12
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Regime switching model: real or spurious long memory? (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:b05100

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