Markov-Switching GARCH Models in R: The MSGARCH Package

Journal of Statistical Software, Vol. 91, Issue 4, 2019

38 Pages Posted: 2 Oct 2016 Last revised: 20 Nov 2019

See all articles by David Ardia

David Ardia

HEC Montreal - Department of Decision Sciences

Keven Bluteau

HEC Montreal - Department of Decision Sciences; Ghent University - Department of Economics

Kris Boudt

Ghent University; Vrije Universiteit Brussel; Vrije Universiteit Amsterdam

Leopoldo Catania

Aarhus University - School of Business and Social Sciences; Aarhus University - CREATES

Denis-Alexandre Trottier

Laval University, Faculté d'Administration, Département de Finance et Assurance, Students

Date Written: September 20, 2016

Abstract

We describe the package MSGARCH, which implements Markov-switching GARCH models in R with efficient C++ object-oriented programming. Markov-switching GARCH models have become popular methods to account for regime changes in the conditional variance dynamics of time series. The package MSGARCH allows the user to perform simulations as well as Maximum Likelihood and MCMC/Bayesian estimations of a very large class of Markov-switching GARCH-type models. The package also provides methods to make single-step and multi-step ahead forecasts of the complete conditional density of the variable of interest. Risk management tools to estimate conditional volatility, Value-at-Risk, and Expected-Shortfall are also available. We illustrate the broad functionality of the MSGARCH package using exchange rate and stock market return data.

Keywords: GARCH, MSGARCH, Markov-switching, conditional volatility, forecasting, R software

JEL Classification: C01, C24, C53, C58

Suggested Citation

Ardia, David and Bluteau, Keven and Boudt, Kris and Catania, Leopoldo and Trottier, Denis-Alexandre, Markov-Switching GARCH Models in R: The MSGARCH Package (September 20, 2016). Journal of Statistical Software, Vol. 91, Issue 4, 2019, Available at SSRN: https://ssrn.com/abstract=2845809 or http://dx.doi.org/10.2139/ssrn.2845809

David Ardia

HEC Montreal - Department of Decision Sciences ( email )

3000 Côte-Sainte-Catherine Road
Montreal, QC H2S1L4
Canada

Keven Bluteau (Contact Author)

HEC Montreal - Department of Decision Sciences ( email )

3000 Côte-Sainte-Catherine Road
Montreal, QC H2S1L4
Canada

Ghent University - Department of Economics ( email )

Belgium

Kris Boudt

Ghent University ( email )

Sint-Pietersplein 5
Gent, 9000
Belgium

Vrije Universiteit Brussel ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Leopoldo Catania

Aarhus University - School of Business and Social Sciences ( email )

Fuglesangs Allé 4
Aarhus V, DK-8210
Denmark
+4587165536 (Phone)

HOME PAGE: http://pure.au.dk/portal/en/leopoldo.catania@econ.au.dk

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

Denis-Alexandre Trottier

Laval University, Faculté d'Administration, Département de Finance et Assurance, Students ( email )

Pavillon Palasis-Prince
Quebec, Quebec G1K 7P4
Canada

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