A Monte Carlo Study On The Selection Of Cointegrating Rank Using Information Criteria
AbstractWe conduct Monte Carlo simulations to evaluate the use of information criteria (Akaike information criterion AIC and Schwarz information criterion SC ) as an alternative to various probability-based tests for determining cointegrating rank in multivariate analysis. First, information criteria are used to determine cointegrating rank given the lag order in a levels vector autoregression. Second, information criteria are used to determine the lag order and cointegrating rank simultaneously. Results show that AIC has an advantage over trace tests for cointegrated or stationary processes in small samples. AIC does not perform well in large samples. The performance of SC is close to that of the trace test. SC shows better large sample results than AIC and the trace test, even if the series are close to nonstationary series or they contain large negative moving average components. We also find evidence that supports the joint estimation of lag order and cointegrating rank by the SC criterion. We conclude that information criteria can complement traditional parametric tests.We are grateful to Peter C.B. Phillips and an anonymous referee for their comments, which significantly improved the paper.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Econometric Theory.
Volume (Year): 21 (2005)
Issue (Month): 03 (June)
Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_ECTProvider-Email:email@example.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bessler, David A. & Leatham, David J. & Yang, Juan, 2005. "In Search of the "Bank Lending Channel": Causality Analysis for the Transmission Mechanism of U.S. Monetary Policy," 2005 Annual meeting, July 24-27, Providence, RI 19558, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Xu Cheng & Peter C.B. Phillips, 2008.
"Semiparametric Cointegrating Rank Selection,"
Cowles Foundation Discussion Papers
1658, Cowles Foundation for Research in Economics, Yale University.
- Badi Baltagi & Zijun Wang, 2007.
"Testing for Cointegrating Rank Via Model Selection: Evidence From 165 Data Sets,"
Springer, vol. 33(1), pages 41-49, July.
- Badi H. Baltagi & Zijun Wang, 2006. "Testing for Cointegrating Rank via Model Selection: Evidence from 165 Data Sets," Center for Policy Research Working Papers 83, Center for Policy Research, Maxwell School, Syracuse University.
- Peri, Massimo & Baldi, Lucia, 2010. "Vegetable oil market and biofuel policy: An asymmetric cointegration approach," Energy Economics, Elsevier, vol. 32(3), pages 687-693, May.
- Miller, J. Isaac & Ratti, Ronald A., 2009.
"Crude oil and stock markets: Stability, instability, and bubbles,"
Elsevier, vol. 31(4), pages 559-568, July.
- J. Isaac Miller & Ronald Ratti, 2008. "Crude Oil and Stock Markets: Stability, Instability, and Bubbles," Working Papers 0810, Department of Economics, University of Missouri, revised 20 Jan 2009.
- Dierk Herzer, 2010. "Outward FDI and economic growth," Journal of Economic Studies, Emerald Group Publishing, vol. 37(5), pages 476-494, September.
- Park, Haesun & Mjelde, James W. & Bessler, David A., 2008. "Price interactions and discovery among natural gas spot markets in North America," Energy Policy, Elsevier, vol. 36(1), pages 290-302, January.
- Hagerman, Amy D. & Jin, Yanhong H., 2009. "The Buzz In The Pits: Livestock Futures' Response To A Rumor Of Foreign Animal Disease," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49493, Agricultural and Applied Economics Association.
- Mjelde, James W. & Bessler, David A., 2009. "Market integration among electricity markets and their major fuel source markets," Energy Economics, Elsevier, vol. 31(3), pages 482-491, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).
If references are entirely missing, you can add them using this form.