How to use the files:

1. Open both the 'Data' and the 'MarkovSwitchingCode' in EViews. 
2. Press 'run' in the file 'MarkovSwitchingCode'.
3. After the calculations are finished you can find the results in the Eviews objects starting with 'ms_'. The results
   for the regression coefficients are stored in 'ms_model', the standard deviations and transition probabilities
   are saved in 'std_dev' and 'trans_prob' respectively.
4. If you want to rerun the calculations, change %prestr to a value that hasn't been used. This will give the resulting
Eviews objects names that start with %prestr.

You can change the model by

a) changing the series that are used in the two regimes by removing the name(s) of the series from 'ms_reg1' and 
   'ms_reg2' respectively. Note: The 'ms_reg1'and 'ms_reg2'have to start with 'europe_d c'.

b) you can use the same beta-parameters in both regimes by adding the name of the series to the 'samecoeff' 
group.

The series are:
 cds_d: 	changes in CDS spreads
 cds_d_l: 	first lag of cds_d 
 stocks_r: 	stock returns
 slope102_d:	changes in the slope between 10 and 2 year interest rates
 iv_d:		changes in implied volatility
 r5_d:		changes in the 5-year interest rate
 

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Example:


%prestr = "a_"
	
group ms_reg1 cds_d c cds_d_l stocks_r iv_d r5_d 
group ms_reg2 cds_d c cds_d_l iv_d r5_d slope102_d 


group samecoeff iv_d


Andreas Kaeck, February 2008
a.kaeck@icmacentre.rdg.ac.uk

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If this code is adapted to produce published results, please insert the following acknowledgement:

These results were based on the Markov Switching code from Alexander (2008), adding the reference
Alexander, C. (2008) Market Risk Analysis, Volume II Practical Financial Econometrics, JOhn Wileys and Sons Ltd.