A multivariate Markov chain model for categorical data sequences and its applications in demand predictions

Abstract

Markov models are commonly used in modelling many practical systems such as telecommunication systems, manufacturing systems and inventory systems. In this paper we propose a multivariate Markov chain model for modelling multiple categorical data sequences. We develop efficient estimation methods for the model parameters. We then apply the model and method to demand predictions for a soft-drink company in Hong Kong.