Forecasting Markov-switching dynamic , conditionally heteroscedastic processes

@inproceedings{Davidson2004ForecastingMD,
  title={Forecasting Markov-switching dynamic , conditionally heteroscedastic processes},
  author={James Davidson},
  year={2004}
}
Recursive formulae are derived for the multi-step point forecasts and forecast standard errors of Markov switching models with ARMA(1; q) dynamics (including the fractionally integrated case) and conditional heteroscedasticity in ARCH(1) form. Hamilton’s dynamic models of switching mean and variance are also treated, in a slightly modi…ed version of the analysis. 1 Introduction Computing multi-step forecasts for nonlinear dynamic models is inherently di¢ cult because there is no natural way to… CONTINUE READING