Selecting the Order of an ARCH Model

Anthony W. Hughes, Maxwell King and Kian Teng Kwek
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Anthony W. Hughes: Department of Economics, University of Adelaide

No 1999-01, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: Since the parameters of an autoregressive conditional heteroskedasticity (ARCH) process must be non-negative, inference on ARCH parameters can be improved by using inequality constrained estimation. In this paper, we extend this principle to the problem of ARCH lag order selection. We show that in the case of AIC, the appropriate adjustment to the penalty function has a simple form.

Keywords: inequality constrained maximum likelihood; one-sided AIC; model selection (search for similar items in EconPapers)
JEL-codes: C22 C52 (search for similar items in EconPapers)
Pages: 8 pages
Date: 1999
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Published in Economics Letters, 2004, vol. 83, issue 2, pp. 269-275

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