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Goodness-of-fit testing for regime-switching models

Janczura, Joanna and Weron, Rafal (2010): Goodness-of-fit testing for regime-switching models.

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Abstract

In this paper we propose a novel goodness-of-fit testing scheme for regime-switching models. We consider models with an observable, as well as, a latent state process. The test is based on the Kolmogorov-Smirnov supremum-distance statistic and the concept of the weighted empirical distribution function. We apply the proposed scheme to test whether a 2-state Markov regime-switching model fits electricity spot price data.

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