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Goodness-of-fit testing for regime-switching models

Publication Date
  • C52 - Model Evaluation
  • Validation
  • And Selection
  • C12 - Hypothesis Testing: General
  • Q40 - General


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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