Markov Regime Switching-Garch Modeling On World Oil Prices

Abstract

This study aims to explain and test the performance of the best forecasting model for world oil prices. The world oil price is included in a time-series data type that has high volatility and different variants at each point in time. Precise and precise time-series modeling of this type of data is required to properly explain structural changes and explain any shift in volatility. The method that is applied and produces the best model in describing world oil prices is the Markov Regime Switching-GARCH. Modeling results can be used as alternative data for investor’s consideration for determining their investment decisions.