scholarly journals Regime Shifts in the Behaviour of International Currency and Equity Markets: A Markov-Switching Analysis

2021 ◽  
Author(s):  
Pami Dua ◽  
Divya Tuteja
Keyword(s):  
Markov Switching ◽  
Equity Markets ◽  
Regime Shifts ◽  
International Currency

scholarly journals An Examination of the Asian Crisis: Regime Shifts in Currency and Equity Markets

2005 ◽  
Vol 78 (1) ◽  
pp. 169-211 ◽  
Author(s):  
Jarl G. Kallberg ◽  
Crocker H. Liu ◽  
Paolo Pasquariello
Keyword(s):  
Equity Markets ◽  
Regime Shifts ◽  
Asian Crisis

Allocation to industry portfolios under Markov switching returns

2013 ◽  
Vol 30 (4) ◽  
pp. 317-346 ◽  
Author(s):  
Deniz Kebabci Tudor
Keyword(s):  
Portfolio Choice ◽  
Parameter Uncertainty ◽  
Regime Switching ◽  
Markov Switching ◽  
Regime Shifts ◽  
Optimal Portfolio ◽  
Switching Behavior ◽  
High Tech ◽  
Content Type ◽  
Long Run

Purpose – The purpose of this paper is to examine the effects of parameter uncertainty in the returns process with regime shifts on optimal portfolio choice over the long run for a static buy-and-hold investor who is investing in industry portfolios. Design/methodology/approach – This paper uses a Markov switching model to model returns on industry portfolios and propose a Gibbs sampling approach to take into account parameter uncertainty. This paper compares the results with a linear benchmark model and estimates without taking into account parameter uncertainty. This paper also checks the predictive power of additional predictive variables. Findings – Incorporating parameter uncertainty and taking into account the possible regime shifts in the returns process, this paper finds that such investors can allocate less in the long run to stocks. This holds true for both the NASDAQ portfolio and the individual high tech and manufacturing industry portfolios. Along with regime switching returns, this paper examines dividend yields and Treasury bill rates as potential predictor variables, and conclude that their predictive effect is minimal: the allocation to stocks in the long run is still generally smaller. Originality/value – Studying the effect of regime switching behavior in returns on the optimal portfolio choice with parameter uncertainty is our main contribution.

New Evidence of Asymmetric Dependence Structures in International Equity Markets

2008 ◽  
Vol 43 (3) ◽  
pp. 787-815 ◽  
Author(s):  
Tatsuyoshi Okimoto
Keyword(s):  
Markov Switching ◽  
Equity Markets ◽  
Normal Model ◽  
Multivariate Normal ◽  
International Equity Markets ◽  
Bear Markets ◽  
Asymmetric Dependence ◽  
International Equity ◽  
Multivariate Normal Model ◽  
Dependence Structures

AbstractA number of recent studies finds two asymmetries in dependence structures in international equity markets; specifically, dependence tends to be high in both highly volatile markets and in bear markets. In this paper, a further investigation of asymmetric dependence structures in international equity markets is performed by using the Markov switching model and copula theory. Combining these two theories enables me to model dependence structures with sufficient flexibility. Using this flexible framework, I indeed find that there are two distinct regimes in the U. S.-U. K. market. I also show that for the U. S.-U. K. market the bear regime is better described by an asymmetric copula with lower tail dependence with clear rejection of the Markov switching multivariate normal model. In addition, I show that ignorance of this further asymmetry in bear markets is very costly for risk management. Lastly, I conduct a similar analysis for other G7 countries, where I find other cases in which the use of a Markov switching multivariate normal model would be inappropriate.

scholarly journals Time Series Analysis of the US Term Structure of Interest Rates Using a Bayesian Markov Switching Cointegration Model

2017 ◽  
Vol 9 (3) ◽  
pp. 49
Author(s):  
Katsuhiro Sugita
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Risk Premium ◽  
Markov Switching ◽  
Strong Support ◽  
Regime Shifts ◽  
Stable Regime ◽  
The Us ◽  
High Inflation ◽  
High Volatility

This paper examines the US term structure of interest rates using a Bayesian Markov switching cointegration model that allows the cointegrating vectors, the number of cointegrating rank, the risk premium, and other parameters to change when regime shifts. We find that for any pair of the interest rates there is a strong support for the cointegrating implication of the expectation hypothesis at least in a stable regime, while for some pairs of the interest rates the cointegration does not occur in a high volatility regime. We find that a Markov switching cointegration model captures regime shifts that are corresponding to high inflation regime. In high inflation regime, variance is much higher for both the long and short rates and adjustment toward equilibrium is much faster than those in the other regime.

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