A Markov regime-switching event response model: beef price spread response to processing capacity shocks

Abstract This research introduces a new method for event studies in time-series analysis named the Markov regime-switching event response model (MS-ERM). The MS-ERM is a comprehensive approach that integrates two different event study approaches: 1) measuring the impact of an event through structural shift and 2) measuring the impact via additional distributional components. As an empirical application, the study measures the impact of beef-packing plant closures on the weekly live-to-cutout beef price spread. The results indicate that the MS-ERM is a promising tool for event studies, particularly when an empirical dataset has both groups of events that cause and do not cause structural changes.