Abstract
This study investigates the regimes developed in the S&P 200 Energy Index using the Markov regime-switching GARCH model with the asymmetry feature. We also undertake to compare the Markov regime-switching GJR-GARCH model with its single regime counterpart for the Value-at-Risk one-step ahead forecast with the Backtest settings. The results indicate two regimes for the S&P 200 Energy Index with different volatility characteristics. The MS-GJR-GARCH model performs better than the GJR-GARCH model in out-of-sample Value-at-Risk analysis as per the dynamic quantile test. The results are significant for the investors forming their trading strategy based on historical data.
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