Markov Regime-Switching in Forecasting Models
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This thesis studies Markov-switching model and its applications in commodity markets with a long historical data series. The background theory of Markov chain is summarized, and the Markov switching model is introduced and discussed. Then, literature surrounding the Markov-switching model is reviewed from the earliest iterations of Hamilton to recent development. The research imposes the features of Markov regime-switching models, considering gold as a financial asset to offer a comprehensive methodology for forecasting commodity price. We show that applying Markov regime-switching could significantly improve the forecast abilities in commodity prices. The analysis indicates that the abnormal increases of gold price in history always resulted from special economic conditions. This study makes a novel contribution to the field by demonstrating that the impact of CPI change to gold price is subject to the regimes, which is more sophisticated than what has been commonly accepted in economics literature to date.
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Copyright © 2020 the author(s). Theses may be used for non-commercial research, educational, or related academic purposes only. Such uses include personal study, research, scholarship, and teaching. Theses may only be shared by linking to Carleton University Institutional Repository and no part may be used without proper attribution to the author. No part may be used for commercial purposes directly or indirectly via a for-profit platform; no adaptation or derivative works are permitted without consent from the copyright owner.
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- 2020
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nguyen-markovregimeswitchinginforecastingmodels.pdf | 2023-05-05 | Public | Download |