Selection Criteria in Regime Switching Conditional Volatility Models
A large number of nonlinear conditional heteroskedastic models have been proposed in the literature. Model selection is crucial to any statistical data analysis. In this article, we investigate whether the most commonly used selection criteria lead to choice of the right specification in a regime sw...
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| Format: | Article |
| Language: | English |
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MDPI AG
2015-05-01
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| Series: | Econometrics |
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| Online Access: | http://www.mdpi.com/2225-1146/3/2/289 |
| _version_ | 1798005167519432704 |
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| author | Thomas Chuffart |
| author_facet | Thomas Chuffart |
| author_sort | Thomas Chuffart |
| collection | DOAJ |
| description | A large number of nonlinear conditional heteroskedastic models have been proposed in the literature. Model selection is crucial to any statistical data analysis. In this article, we investigate whether the most commonly used selection criteria lead to choice of the right specification in a regime switching framework. We focus on two types of models: the Logistic Smooth Transition GARCH and the Markov-Switching GARCH models. Simulation experiments reveal that information criteria and loss functions can lead to misspecification ; BIC sometimes indicates the wrong regime switching framework. Depending on the Data Generating Process used in the experiments, great care is needed when choosing a criterion. |
| first_indexed | 2024-04-11T12:35:54Z |
| format | Article |
| id | doaj.art-b87c7c3cd87a443aa67093415ba5e48d |
| institution | Directory Open Access Journal |
| issn | 2225-1146 |
| language | English |
| last_indexed | 2024-04-11T12:35:54Z |
| publishDate | 2015-05-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Econometrics |
| spelling | doaj.art-b87c7c3cd87a443aa67093415ba5e48d2022-12-22T04:23:38ZengMDPI AGEconometrics2225-11462015-05-013228931610.3390/econometrics3020289econometrics3020289Selection Criteria in Regime Switching Conditional Volatility ModelsThomas Chuffart0Aix-Marseille University (Aix Marseille School of Economics), CNRS & EHESS, Marseille, 13002, FranceA large number of nonlinear conditional heteroskedastic models have been proposed in the literature. Model selection is crucial to any statistical data analysis. In this article, we investigate whether the most commonly used selection criteria lead to choice of the right specification in a regime switching framework. We focus on two types of models: the Logistic Smooth Transition GARCH and the Markov-Switching GARCH models. Simulation experiments reveal that information criteria and loss functions can lead to misspecification ; BIC sometimes indicates the wrong regime switching framework. Depending on the Data Generating Process used in the experiments, great care is needed when choosing a criterion.http://www.mdpi.com/2225-1146/3/2/289conditional volatilitymodel selectionGARCHregime switching |
| spellingShingle | Thomas Chuffart Selection Criteria in Regime Switching Conditional Volatility Models Econometrics conditional volatility model selection GARCH regime switching |
| title | Selection Criteria in Regime Switching Conditional Volatility Models |
| title_full | Selection Criteria in Regime Switching Conditional Volatility Models |
| title_fullStr | Selection Criteria in Regime Switching Conditional Volatility Models |
| title_full_unstemmed | Selection Criteria in Regime Switching Conditional Volatility Models |
| title_short | Selection Criteria in Regime Switching Conditional Volatility Models |
| title_sort | selection criteria in regime switching conditional volatility models |
| topic | conditional volatility model selection GARCH regime switching |
| url | http://www.mdpi.com/2225-1146/3/2/289 |
| work_keys_str_mv | AT thomaschuffart selectioncriteriainregimeswitchingconditionalvolatilitymodels |