Can the LR test be helpful in choosing the optimal lag order in the VAR model when information criteria suggest different lag orders?
AbstractThe objective of this simulation study is to investigate whether the likelihood ratio (LR) test can pick the optimal lag order in the vector autoregressive model when the most applied information criteria (i.e. vector Schwarz-Bayesian, SBC and vector Hannan-Quinn, HQC) suggest two different lag orders. This lag-choosing procedure has been suggested by Hatemi-J (1999). The results based on the Monte Carlo simulations show that combining the LR test with SBC and HQC causes a substantial increase in the success rate of choosing the optimal lag order compared to cases when only SBC or HQC are used. This appears to be the case irrespective of homoscedasticity or conditional heteroscedasticity properties of the error-term in small sample sizes. This improvement in choosing the right lag order also tends to improve the forecasting capability of the underlying model.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 41 (2009)
Issue (Month): 9 ()
Contact details of provider:
Web page: http://www.tandfonline.com/RAEC20
You can help add them by filling out this form.
reading lists or Wikipedia pages:
- مدل بردارهای خودبرگشتی in Wikipedia Persian ne '')
- Векторна авторегресія in Wikipedia Ukranian ne '')
- Vector autoregression in Wikipedia English ne '')
- Vektör otoregresyon in Wikipedia Turkish ne '')
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.