This paper develops a model for the forward and spot exchange rate which allows for the presence of a Markov switching risk premium in the forward market and considers the issue of testing the unbiased forward exchange rate (UFER) hypothesis. Using US/UK data, it is shown that the UFER...

This article deals with using panel data to infer regime changes that are common to all of the cross section. The methods presented here apply to Markov switching vector autoregressions, dynamic factor models with Markov switching and other multivariate Markov switching models. The key feature...

This paper considers maximum likelihood (ML) estimation in a large class of models with hidden Markov regimes. We investigate consistency and local asymptotic normality of the ML estimator under general conditions which allow for autoregressive dynamics in the observable process,...