Forecasting Markov switching vector autoregressions: Evidence from simulation and application

• Published in: Journal of forecasting Vol. 44; no. 1; pp. 136 - 152
• Main Author: Cavicchioli, Maddalena
• Format: Journal Article
• Language: English
• Published: Chichester Wiley Periodicals Inc 01.01.2025
• Subjects: business cycle; Feasibility; Forecasting; Markov analysis; Markov switching vector autoregressive models; Matrices; Numerical analysis; optimal weights; regime shifts; sample weighting observations; Simulation; state space representation; Time series; Weighting

We derive the optimal forecasts for multivariate autoregressive time series processes subject to Markov switching in regime. Optimality means that the trace of the mean square forecast error matrix is minimized by using suitable weighting observations. Then we provide neat analytic expressions for t...