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
