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A Regime Switching Vector Error Correction Model of Analysis of Cointegration in Oil, Gold, Stock Markets

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Structural Changes and their Econometric Modeling (TES 2019)

Part of the book series: Studies in Computational Intelligence ((SCI,volume 808))

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Abstract

This paper uses the concept of Markov Switching Vector Error Correction model (MS-VECM) to examine the relationship among USA stock, gold and crude oil markets with monthly data set from May 1988 to May 2018. The various specifications of the model, namely MSIAH-VECM, MSIA-VECM, and MSIH-VECM are considered and compared in this study. The results show that MSIAH-VECM outperforms other MS-VECM specifications and also linear VECM. The model can capture all structural changes in the financial time series data, corresponding to the NBER recession periods. We also find significant positive effect of gold on oil, and stock on oil during the market upturn.

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Acknowledgements

The authors are grateful to Puay Ungphakorn Centre of Excellence in Econometrics, Faculty of Economics, Chiang Mai University for the financial support.

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Authors and Affiliations

  1. Center of Excellence in Econometrics, Faculty of Economics, Chiang Mai University, Chiang Mai, 50200, Thailand

    Sukrit Thongkairat, Woraphon Yamaka & Songsak Sriboonchitta

  2. International College of Digital Innovation, Chiang Mai University, Chiang Mai, 50200, Thailand

    Sukrit Thongkairat

Authors
  1. Sukrit Thongkairat
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  2. Woraphon Yamaka
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  3. Songsak Sriboonchitta
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Corresponding author

Correspondence to Sukrit Thongkairat .

Editor information

Editors and Affiliations

  1. Department of Computer Science, University of Texas at El Paso, El Paso, TX, USA

    Vladik Kreinovich

  2. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Songsak Sriboonchitta

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Thongkairat, S., Yamaka, W., Sriboonchitta, S. (2019). A Regime Switching Vector Error Correction Model of Analysis of Cointegration in Oil, Gold, Stock Markets. In: Kreinovich, V., Sriboonchitta, S. (eds) Structural Changes and their Econometric Modeling. TES 2019. Studies in Computational Intelligence, vol 808. Springer, Cham. https://doi.org/10.1007/978-3-030-04263-9_40

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