Markov-switching models : empirical applications using classical and Bayesian inference

In this thesis, we present three empirical applications on finance and macroeconomics. The general modeling framework in all chapters is based on extensions of the Markov-switching model. And the statistical methodology is divided into two distinct areas; Classical and Bayesian inference.1 In the first one, we test for the presence of duration dependence in the Brazilian business cycle. The main results indicated that as the recession ages, the probability of a transition into an expansion increases (positive duration dependence in recessions). On the other hand, as the expansions ages, the probability of a transition into a recession decreases (negative duration dependence in expansions). In the second paper, we extend the research concerned with the evaluation of alternative volatility modeling and forecasting methods for Bitcoin log-returns. The in-sample estimates suggest evidence of long memory in the data series. When performing one-day ahead Value-at-Risk (VaR), our results outperform all standard single-regime GARCH models considered in the study. Finally, in the third paper, we capture different regimes in Bitcoin volatility returns and test the mean-reversion hypothesis for multi-period returns. In general, we found evidence of mean-aversion for different holding returns. We also confirmed this result for alternative specifications and also carrying the analysis for sub-sample periods

Macroeconomic Determinants of Bank Spread in Brazil: An Empirical Evaluation

Despite a decline in interest rates since mid-1999, bank spread in Brazil continues extremely high in international terms and in recent years has stood at around 40%. This paper analyses the determinants of bank spread in Brazil, seeking particularly to analyse the macroeconomic determinants of spread in recent times. It uses a VAR model to identify the macroeconomic variables that may directly or indirectly have been influencing spread in Brazil over the period 1994-2005. It presents evidence that interest rate levels and, to a lesser degree, the inflation rate are the main macroeconomic determinants of high bank spread in Brazil.Bank Spread, VAR models, Brazilian banking sector

Mitigating the choice of the duration in DDMS models through a parametric link

One of the most important hyper-parameters in duration-dependent Markov-switching (DDMS) models is the duration of the hidden states. Because there is currently no procedure for estimating this duration or testing whether a given duration is appropriate for a given data set, an ad hoc duration choice must be heuristically justified. This is typically a difficult task and is likely the most delicate point of the modeling procedure, allowing for criticism and ultimately hindering the use of DDMS models. In this paper, we propose and examine a methodology that mitigates the choice of duration in DDMS models when forecasting is the goal. The idea is to use a parametric link instead of the usual fixed link when calculating transition probabilities. As a result, the model becomes more flexible and any potentially incorrect duration choice (i.e., misspecification) is compensated by the parameter in the link, yielding a likelihood and transition probabilities very close to the true ones while, at the same time, improving forecasting accuracy under misspecification. We evaluate the proposed approach in Monte Carlo simulations and using real data applications. Results indicate that the parametric link model outperforms the benchmark logit model, both in terms of in-sample estimation and out-of-sample forecasting, for both well-specified and misspecified duration values

Mitigating the choice of the duration in DDMS models through a parametric link

Um dos hiperparâmetros mais importantes em modelos de mudança de regime Markoviana e duração dependente (DDMS) é a duração dos regimes. Uma vez que não existe nenhum procedimento para estimar ou testar uma dada duração para um determinado conjunto de dados, geralmente uma escolha ad hoc deve ser heuristicamente justificada. Esta é uma tarefa tipicamente difícil e é provavelmente o ponto mais delicado da modelagem via modelos DDMS, sendo motivo de críticas, dificultando a sua aplicação. Neste trabalho, propomos e estudamos uma metodologia que atenua a escolha da duração nos modelos DDMS quando o foco é a previsão. A proposta é a utilização de um link paramétrico em vez do habitual link fixo ao calcular as probabilidades de transição. Como resultado, o modelo torna-se mais flexível e escolhas do parâmetro de duração potencialmente incorretas (ou seja, erro de especificação) é compensada pelo parâmetro no link, produzindo probabilidades de transição próximas das verdadeiras e, ao mesmo tempo, melhorando a precisão da previsão no contexto de erro de especificação. A abordagem proposta é avaliada através de simulações de Monte Carlo e uma aplicação com dados reais é apresentada. Os resultados indicam que o modelo de link paramétrico supera o modelo logit, tanto em termos de previsões dentro da amostra quanto fora da amostra, tanto para valores de duração corretamente especificados como para valores de duração mal especificados.One of the most important hyper-parameters in duration-dependent Markov-switching (DDMS) models is the duration of the hidden states. Because there is currently no procedure for estimating this duration or testing whether a given duration is appropriate for a given data set, an ad hoc duration choice must be heuristically justified. This is typically a difficult task and is likely the most delicate point of the modeling procedure, allowing for criticism and ultimately hindering the use of DDMS models. In this work, we propose and examine a methodology that mitigates the choice of duration in DDMS models when forecasting is the goal. The idea is to use a parametric link instead of the usual fixed link when calculating transition probabilities. As a result, the model becomes more flexible and any potentially incorrect duration choice (i.e., misspecification) is compensated by the parameter in the link, yielding a likelihood and transition probabilities very close to the true ones while, at the same time, improving forecasting accuracy under misspecification. We evaluate the proposed approach in Monte Carlo simulations and using real data applications. Results indicate that the parametric link model outperforms the benchmark logit model, both in terms of in-sample estimation and out-ofsample forecasting, for both well-specified and misspecified duration values

Evidências de Bull e Bear Market no índice Bovespa: uma aplicação de modelos de regime markoviano e duration dependence

Dissertação (mestrado) - Universidade Federal de Santa Catarina, Centro Sócio Econômico, Programa de Pós-Graduação em Economia, Florianópolis, 2013.O objetivo deste trabalho é identificar tendências de alta e de baixa no índice Bovespa através de modelos de mudança de regime markoviano que incorporam dependência de duração. Conforme evidenciado pela literatura,os resultados mostraram um regime de retorno positivo e baixa volatilidade e outro com alta volatilidade e retorno negativo. Nestes modelos a probabilidade de transição não é só função do regime atual como também do número de períodos em que o processo se encontra em determinado estado. A parametrização proposta revelou que a probabilidade de troca de regime diminui com a persistência do mercado de alta e de baixa. A análise das probabilidades suavizadas destaca que as especificações captaram os principais episódios de instabilidade na bolsa brasileira.Por fim, os modelos propostos são usados na construção de uma estratégia de investimento. Abstract : This study proposes to identify Bull and Bear Market for the Brazilianstock market using a markov switching model that incorporates durationdependence. Following the existing literature, the model sorts returnsinto a high return stable state and a low return volatile state, whichare labeled as Bull and Bear Market. In these models the transitionprobabilities are functions of both the inferred current state and alsothe number of periods that the process has been in that state. The parameterizationshowed that the probability of switching out of the statesdeclines with duration in that state. The smoothed probabilities highlightedthe major instabilities phases at Brazilian stock market. Finally,the proposed models are used in order to develop an investment strategy

The uptake of macronutrients by an active silicon accumulator plant growing in two different substrata

Pennisetum clandestinum (Graminae/Poaceae) an active Si-accumulator, was cultivated in two different substrata, both with reduced Si solubility. Plants growing in organic-rich soils contained much less Ca, K, Na and Si, than species growing in sandy soils. Although the highest macronutrient concentrations were associated to the highest Si levels in the organs of P. clandestinum, the R correlation values indicate that Si does not influence the internal balance and the uptake of these elements. In ca 65% of the cases roots have the highest average values regardless of the type of culture, while the contents of Mg in the shoots and roots of P. clandestinum were generally not significantly different (P>0.05). A significant decline of the macronutrient levels associated to the shoots and roots of P. clandestinum was observed from the 4th to the 6th month assay, especially for Ca in both organs, while for Mg and Na the decline is focused mainly in the shoots; K and Si decline is generally below 10%. When average values of Si in shoots and roots of plants collected from organic- rich and sandy soils were plotted against the average concentrations of Ca, K, Mg and Na in the same organs, weak but positive R correlation values were obtained - the highest R values were observed for Na and K and the lowest for Ca and Mg, regardless of the culture. Exception for the high R value observed for K, although the influence of Si on the K status in the whole plant is time-depending - R values, diminished from the 4th to the 6th month, as it happens in the majority of the cases. In conclusion, P. clandestinum can grow well and healthily in substrata with acid pH values and high carbonate content and low solubility of Si suggesting that the definition of the essentiality of Si, even in a Si-accumulator plant is still a matter of great controversy.publishersversionpublishe

Análise da Taxa de Câmbio a Partir do Índice de Pressão Cambial: A Experiência Brasileira de 1994 a 1999

Este artigo analisa a evolução da taxa de câmbio brasileira a partir da adoção da âncora cambial no Plano Real. Para tanto, construiu-se um índice de pressão cambial com base na metodologia de Eichengreen et alii (1995, 1996) que detecta não só mudanças nas variações da taxa de câmbio, mas também ataques especulativos nos quais as autoridades monetárias foram bem sucedidas em defender o Real. Foram elaboradas diversas versões do índice com diferentes variáveis constitutivas, periodicidade e pesos de ponderação. Os vários resultados obtidos capturaram os ataques especulativos sofridos pela moeda brasileira de 1995 a 1999, em especial os ataques derivados das crises mexicana, asiática, russa e, finalmente, da própria crise cambial brasileira. Além disso, a decomposição do índice de pressão cambial possibilitou detectar o quão foram utilizadas as reservas internacionais e a política monetária, via taxa de juros, para defender o regime de câmbio administrado.Índice de Pressão Cambial, Administração da Taxa de Câmbio, Âncora Cambial, Ataques Especulativos