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Comparison of Akaike
information criterion (AIC) and Bayesian information
criterion (BIC) in selection of an
asymmetric
price relationship
Henry de-Graft Acquah
Department of Agricultural Economics and Extension,
University of Cape Coast, Cape Coast, Ghana. E-mail:
henrydegraftacquah@yahoo.com. Tel: 00233245543956.
Accepted
1 December, 2009 |
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Information criteria provide an attractive basis for model
selection. However, little is understood about their
relative performance in asymmetric price transmission
modelling framework. To explore this issue, this research
evaluated the performance of the two commonly used model
selection criteria, Akaike information criteria (AIC) and
Bayesian information criteria (BIC) in discriminating
between asymmetric price transmission models under various
conditions. Monte Carlo experimentation indicated that the
performance of the different model selection criteria are
affected by the size of the data, the level of asymmetry and
the amount of noise in the model used in the application.
The Bayesian information criterion is consistent and
outperforms AIC in selecting the suitable asymmetric price
relationship in large samples.
Key words:
Model selection, Akaike’s information criteria (AIC),
Bayesian information criteria (BIC), asymmetry, Monte Carlo. |
