ISSN 2329-9797
International Journal of Agricultural Economics and Extension ISSN 2329-9797 Vol. 7 (1), pp. 001-006, January, 2019. © International Scholars Journals
Full Length Research Paper
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: [email protected]. Tel: 00233245543956.
Accepted 09 December, 2018
Abstract
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.