A hidden Markov regime-switching smooth transition model

Robert J. Elliott, Tak Kuen Siu, John W. Lau

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)


In this paper, we develop a new class of parametric nonlinear time series models by combining two important classes of models, namely smooth transition models and hidden Markov regime-switching models. The class of models is general and flexible enough to incorporate two types of switching behavior: smooth state transitions and abrupt changes in hidden states. The estimation of the hidden states and model parameters is performed by applying filtering theory and a filter-based expectation-maximization (EM) algorithm. Applications of the model are illustrated using simulated data and real financial data. Other potential applications are mentioned.

Original languageEnglish
Article number20160061
JournalStudies in Nonlinear Dynamics and Econometrics
Issue number4
Early online date29 Jun 2018
Publication statusPublished - 2018


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