Abstract:
This study addresses the problem of model selection in asymmetric
price transmission models by combining the use of bootstrap methods with
information theoretic selection criteria. Subsequently, parametric bootstrap
technique is used to select the best model according to Akaike’s Information
Criteria (AIC) and Bayesian Information Criteria (BIC). Bootstrap simulation
results indicated that the performances of AIC and BIC are affected by the size of
the data, the level of asymmetry and the amount of noise in the model used in the
application. This study further establishes that the BIC is consistent and
outperforms AIC in selecting the correct asymmetric price relationship when the
bootstrap sample size is large
