On Joint Determination of the Number of States and the Number of Variables in Markov-Switching Models: A Monte Carlo Study

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Author(s)
Cheung, Adrian
Awirothananon, Thatphong
Year published
2009
Metadata
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In this article, we examine the performance of two newly developed procedures that jointly select the number of states and variables in Markov-switching models by means of Monte Carlo simulations. They are Smith et al. (2006) and Psaradakis and Spagnolo (2006), respectively. The former develops Markov switching criterion (MSC) designed specifically for Markov-switching models, while the latter recommends the use of standard complexity-penalised information criteria (BIC, HQC, and AIC) in joint determination of the state dimension and the autoregressive order of Markov-switching models. The Monte Carlo evidence shows that ...
View more >In this article, we examine the performance of two newly developed procedures that jointly select the number of states and variables in Markov-switching models by means of Monte Carlo simulations. They are Smith et al. (2006) and Psaradakis and Spagnolo (2006), respectively. The former develops Markov switching criterion (MSC) designed specifically for Markov-switching models, while the latter recommends the use of standard complexity-penalised information criteria (BIC, HQC, and AIC) in joint determination of the state dimension and the autoregressive order of Markov-switching models. The Monte Carlo evidence shows that BIC outperforms MSC while MSC and HQC are preferable over AIC.
View less >
View more >In this article, we examine the performance of two newly developed procedures that jointly select the number of states and variables in Markov-switching models by means of Monte Carlo simulations. They are Smith et al. (2006) and Psaradakis and Spagnolo (2006), respectively. The former develops Markov switching criterion (MSC) designed specifically for Markov-switching models, while the latter recommends the use of standard complexity-penalised information criteria (BIC, HQC, and AIC) in joint determination of the state dimension and the autoregressive order of Markov-switching models. The Monte Carlo evidence shows that BIC outperforms MSC while MSC and HQC are preferable over AIC.
View less >
Journal Title
Communications in Statistics: Simulation and Computation
Volume
38
Issue
8
Copyright Statement
© 2009 Taylor & Francis. This is an electronic version of an article published in Communications in Statistics: Simulation and Computation Volume 38, Issue 8 September 2009 , pages 1757 - 1788. Communications in Statistics: Simulation and Computation is available online at: http://www.informaworld.com with the open URL of your article.
Subject
Econometric and Statistical Methods
Mathematical Sciences
Information and Computing Sciences