Abstract
Markov-switching model is a method applied to investigating the structural changes of nonlinear time series. This paper, by constructing three states Markov-switching model, studies the state transition behaviors in the price fluctuation of nonferrous metal from January 2001 to March 2011. Three different kinds of states of SHFE copper price fluctuation are observed: rising sharply, rising mildly and dropping sharply. Each state is characterized with different probability of transition as well as different average duration. The final part presents the causal analysis of the emergence of main state at each phase. The empirical results show that the Markov-switching model can effectively depict fluctuating behavior of non-ferrous metal prices.
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