Can the LR test be helpful in choosing the optimal lag order in the VAR model when information criteria suggest different lag orders?
Abdulnasser Hatemi-J and
R Scott Hacker
Applied Economics, 2009, vol. 41, issue 9, 1121-1125
Abstract:
The 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.
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)
Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00036840601019273 (text/html)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:41:y:2009:i:9:p:1121-1125
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20
DOI: 10.1080/00036840601019273
Access Statistics for this article
Applied Economics is currently edited by Anita Phillips
More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().