Which Lag Length Selection Criteria Should We Employ?
AbstractEstimating the lag length of autoregressive process for a time series is a crucial econometric exercise in most economic studies. This study attempts to provide helpfully guidelines regarding the use of lag length selection criteria in determining the autoregressive lag length. The most interesting finding of this study is that Akaike's information criterion (AIC) and final prediction error (FPE) are superior than the other criteria under study in the case of small sample (60 observations and below), in the manners that they minimize the chance of under estimation while maximizing the chance of recovering the true lag length. One immediate econometric implication of this study is that as most economic sample data can seldom be considered “large” in size, AIC and FPE are recommended for the estimation the autoregressive lag length.
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 AccessEcon in its journal Economics Bulletin.
Volume (Year): 3 (2004)
Issue (Month): 33 ()
Contact details of provider:
Find related papers by JEL classification:
- C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Taylor, Mark P. & Peel, David A., 2000. "Nonlinear adjustment, long-run equilibrium and exchange rate fundamentals," Journal of International Money and Finance, Elsevier, vol. 19(1), pages 33-53, February.
- Sarno, Lucio & Taylor, Mark P., 1998.
"Real exchange rates under the recent float: unequivocal evidence of mean reversion,"
Elsevier, vol. 60(2), pages 131-137, August.
- Lucio Sarno & Mark P. Taylor, . "Real Exchange Rates under the Recent Float: Unequivocal Evidence of Mean Reversion," Economics and Finance Discussion Papers 97-14, Economics and Finance Section, School of Social Sciences, Brunel University.
- Tan Hui Boon & Baharumshah Ahmad Zubaidi, 1999. "Dynamic Causal Chain of Money, Output, Interest Rate and Prices in Malaysia: Evidence Based On Vector Error- Correction Modelling Analysis," International Economic Journal, Taylor & Francis Journals, vol. 13(1), pages 103-120.
- Baharumshah, Ahmad Zubaidi & M. Masih, A. Mansur & Azali, M., 2002. "The stock market and the ringgit exchange rate: a note," Japan and the World Economy, Elsevier, vol. 14(4), pages 471-486, December.
- Venus Khim-Sen Liew & Terence Tai-Leung Chong & Kian-Ping Lim, 2003. "The inadequacy of linear autoregressive model for real exchange rates: empirical evidence from Asian economies," Applied Economics, Taylor & Francis Journals, vol. 35(12), pages 1387-1392.
- Schwert, G William, 1989.
"Tests for Unit Roots: A Monte Carlo Investigation,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 7(2), pages 147-59, April.
- H. Yamada, 2000. "M2 demand relation and effective exchange rate in Japan: a cointegration analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 7(4), pages 229-232.
- Mansor Ibrhim, 2001. "Financial Factors and the Empirical Behavior of Money Demand: A Case Study of Malaysia," International Economic Journal, Taylor & Francis Journals, vol. 15(3), pages 55-72.
- Xu, Zhenhui, 2003. "Purchasing power parity, price indices, and exchange rate forcasts," Journal of International Money and Finance, Elsevier, vol. 22(1), pages 105-130, February.
- Sarantis, Nicholas, 2001. "Nonlinearities, cyclical behaviour and predictability in stock markets: international evidence," International Journal of Forecasting, Elsevier, vol. 17(3), pages 459-482.
- Sarantis, Nicholas, 1999. "Modeling non-linearities in real effective exchange rates," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 27-45, January.
- Hirotugu Akaike, 1969. "Fitting autoregressive models for prediction," Annals of the Institute of Statistical Mathematics, Springer, vol. 21(1), pages 243-247, December.
- Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.