Goodness-of-fit testing for regime-switching models

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

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Regime-switching; Goodness-of-fit; Weighted empirical distribution function; Kolmogorov-Smirnov test
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General

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