This paper examines the relative performance of some popular nonlinearity tests when applied to time series generated by Markov switching autoregressive models. The nonlinearity tests considered include RESET-type tests, the Keenan test, the Tsay test, the McLeod--Li test, the BDS test, the...

This article considers the problem of selecting among competing nonlinear time series models by using complexity-penalized likelihood criteria. An extensive simulation study is undertaken to assess the small-sample performance of several popular criteria in selecting among nonlinear...

This paper examines the relative performance of some popular nonlinearity tests when applied to time series generated by Markov switching autoregressive models. The nonlinearity tests considered include RESET-type tests, the Keenan test, the Tsay test, the McLeod--Li test, the BDS test, the...

This paper is concerned with the problem of joint determination of the state dimension and autoregressive order of models with Markov-switching parameters. A model selection procedure is proposed which is based on optimization of complexity-penalized likelihood criteria. The efficacy of the...

Dynamic models with parameters that are allowed to depend on the state of a hidden Markov chain have become a popular tool for modelling time series subject to changes in regime. An important question that arises in applications involving such models is how to determine the number of states...

This paper explores the possibility of evaluating the adequacy of Markov-switching time series models by comparing selected functionals (such as the spectral density function and moving empirical moments) obtained from the data with those of the fitted model using a bootstrap algorithm. The...

This paper investigates the presence of target-zone nonlinearities in the Pound Sterling/Deutsche Mark exchange rate for the period of the UK European Exchange Rate Mechanism (ERM) membership, using data with frequency of every two days. Tests against general nonlinear specifications as well as...

This paper considers a multivariate extension of the test for neglected nonlinearity proposed by Tsay (1986) that uses principal components to overcome the problem of dimensionality that is common with tests of this type. Monte Carlo experiments reveal that the modified multivariate test...