Bayesian model selection with an uninformative prior
Bayesian model selection with posterior probabilities and no subjective prior information is generally not possible because of the Bayes factors being ill-defined. Using careful consideration of the parameter of interest in cointegration analysis and a re-specification of the triangular model of Phillips (Econometrica, Vol. 59, pp. 283-306, 1991), this paper presents an approach that allows for Bayesian comparison of models of cointegration with 'ignorance' priors. Using the concept of Stiefel and Grassman manifolds, diffuse priors are specified on the dimension and direction of the cointegrating space. The approach is illustrated using a simple term structure of the interest rates model.
|Keywords||bayesian statistical decision theory, cointegration, econometrics, econometriic models, economic models, interest rates, time-series analysis|
Strachan, R.W., & van Dijk, H.K.. (2003). Bayesian model selection with an uninformative prior. Oxford Bulletin of Economics and Statistics. Retrieved from http://hdl.handle.net/1765/11201