This article adopts Markov switching models to establish and examine several types of nonlinear dynamics in exchange rate returns and provide a new test to analyse presence of purchasing power parity (PPP) after controlling for various market states. In contrast with Engle and Hamilton (1990)...

This paper estimates the Value-at-Risk (VaR) on returns of stock market indexes including Dow Jones, Nikkei, Frankfurt Commerzbank index, and FTSE via Markov Switching ARCH (SWARCH) models. It is conjectured that structural changes contribute to non-normality in stock return distributions....

This study examines the performance of Markov-switching model on business cycle by applying the model to various economies. Specifically, three comparison groups are used: (1) the USA and Japan serving as the representatives for the industrialized economies (or IEs hereafter); (2) Taiwan and...

This article tries to answer the question: is the response of current returns to past returns asymmetric when the returns follow an autoregressive, spillover GARCH model? Our empirical findings are consistent with the following notions. First, both US and UK markets appear to overreact to the...

This study examines the dynamic interrelations between American depository receipts (ADRs) and their underlying stocks (UNDs) by using the threshold vector error correction model. In contrast to prior studies focusing on examining the effects of arbitrage threshold on stock return means, this...