Goodness-of-fit testing for the marginal distribution of regime-switching models

Joanna Janczura and Rafał Weron

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we propose a new goodness-of-fit testing scheme for the marginal distribution of regime-switching models. We consider models with an observable (like threshold autoregressions), as well as, a latent state process (like Markov regime-switching). The test is based on the Kolmogorov-Smirnov supremum-distance statistic and the concept of the weighted empirical distribution function. The motivation for this research comes from a recent stream of literature in energy economics concerning electricity spot price models. While the existence of distinct regimes in such data is generally unquestionable (due to the supply stack structure), the actual goodness-of-fit of the models requires statistical validation. We illustrate the proposed scheme by testing whether a commonly used Markov regime-switching model fits deseasonalized electricity prices from the NEPOOL (U.S.) day-ahead market.

Keywords: Regime-switching; marginal distribution; goodness-of-fit; weighted empirical distribution function; Kolmogorov-Smirnov test (search for similar items in EconPapers)
JEL-codes: C12 C52 Q40 (search for similar items in EconPapers)
Date: 2011-07-09
New Economics Papers: this item is included in nep-ecm and nep-ene
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/32532/1/MPRA_paper_32532.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/36461/1/MPRA_paper_36461.pdf revised version (application/pdf)

Related works:
Working Paper: Goodness-of-fit testing for regime-switching models (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:32532

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().