MSVARIANCES—Markov Switching Variance Model

[TomDoan]

MSVARIANCES.RPF is based upon an example from Kim and Nelson(1999), which does a Markov switching model of the variance of a series of returns. This is a (possible) alternative to a GARCH model, as high volatility periods will persist under the control of the switching model, thus you will see the same type of volatility clustering that you would with a GARCH model.

Detailed Description