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Faculty of Economics

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Harvey, A. and Palumbo, D.

Regime Switching Models for Directional and Linear Observations

CWPE2123

Abstract: The score-driven approach to time series modeling provides a solution to the problem of modeling circular data and it can also be used to model switching regimes with intra-regime dynamics. Furthermore it enables a dynamic model to be fitted to a linear and a circular variable when the joint distribution is a cylinder. The viability of the new method is illustrated by estimating a model with dynamic switching and dynamic location and/or scale in each regime to hourly data on wind direction and speed in Galicia, north-west Spain.

Keywords: Circular data, conditional score, cylinder, hidden Markov model, von Mises distribution, wind.

JEL Codes: C22 C32

Author links: Andrew Harvey  Dario Palumbo  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2123.pdf