Our research

Our academic staff are at the forefront of global thinking on issues relating to wealth and wellbeing, strong organisations, transformative innovation, and the

Student resources

Information about program and course selection, enrolment, change of program, variation to enrolment, status and other general matters.


Our alumni may be found in the world’s leading companies, policy agencies and universities.

Contact us

Find contact details for any general enquiries.

Long memory and regime switching: a simulation study on the Markov-switching ARFIMA model

Long memory and regime switching

Yanlin Shi and Kin-Yip Ho

Recent research argues that if the cause of confusion between long memory and regime switching were properly controlled for, they could be effectively distinguished. Motivated by this idea, our study aims to distinguish between them of financial series.

We firstly model long memory and regime switching via the Autoregressive Fractionally Integrated Moving Average (ARFIMA) and Markov Regime-Switching (MRS) models, respectively. Their finite-sample properties and the confusion are investigated via simulations.

To control for the cause of this confusion, we propose the MRS–ARFIMA model. A Monte Carlo study shows that this framework can effectively distinguish between the pure ARFIMA and pure MRS processes. Furthermore, MRS–ARFIMA outperforms the ordinary ARFIMA model for data simulated from the MRS–ARFIMA process.

Finally, empirical studies of hourly and five-minute Garman–Klass and realized volatility of the FTSE index is conducted to demonstrate the advantages and usefulness of the proposed MRS–ARFIMA framework compared with the ARFIMA and MRS models in practice.

Partnership opportunities available

Our College is actively engaged in partnering with industry for the co-creation of value in areas congruent with our research agenda

Find out more >>

Other research you might be interested in


Updated:   18 February 2017 / Responsible Officer:  CBE Communications and Outreach / Page Contact:  College Web Team