Modified Quasi-Likelihood Ratio Test for Regime Switching

Hiroyuki Kasahara, Tatsuyoshi Okimoto, Katsumi Shimotsu

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)


In this paper we propose a modified quasi-likelihood ratio test of the null hypothesis of one regime against the alternative of two regimes in Markov regime-switching models. The asymptotic distribution of the proposed test statistic is a simple function of Gaussian random variables, and the inference is no more complicated than in the standard case. Our simulations show that the proposed test has good finite sample size and power that are comparable to the quasi-likelihood ratio test of Cho and White. We apply our test to stock returns and Japanese policy functions.

Original languageEnglish
Pages (from-to)25-41
Number of pages17
JournalJapanese Economic Review
Issue number1
Publication statusPublished - 2014 Mar
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics


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