Abstract
Changes in stock prices randomly occur due to market forces with reoccurrencepossibilities. This process, also known as the structural break model, is captured throughchanges in the linear model parameters among periods with the Markov Switching Model(MSwM) used for detection. Furthermore, using the smallest Akaike Information Criterion(AIC) value on all feasible MSwM alternatives formed for a daily stock price, the completeMSwM model with its Markov transition is determined. This method has been tested andapplied to daily stock price data in several sectors. The result showed that the number ofregime models coupled with its transition probability helped investors make investmentdecisions.
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