Medel, Carlos A. (2014): Probabilidad Clásica de Sobreajuste con Criterios de Información: Estimaciones con Series Macroeconómicas Chilenas.

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Abstract
This paper provides, via Monte Carlo simulations, estimates of the classical probability of overfitting under an autoregressive environment (AR), using the information criteria (IC) of Akaike, Schwarz and HannanQuinn (AIC, BIC and HQ), calibrated with Chilean data of total inflation, core inflation, Imacec, and monthly return of the nominal exchange rate Chilean pesoAmerican dollar. This probability corresponds to the number of times when a candidate model has a strictly greater number of coefficients than the true model, divided by the total number of searches. The results indicate that the increased risk of overfitting is obtained with the AIC, followed by HQ and finally the BIC. The highest probability of overfitting is achieved with the AIC, reaching 32 and 30% with the exchange rate and Imacec, respectively, followed by 25 and 22% for total and core inflation. Considering the three IC, it is more likely to obtain an overfitted model by just one coefficient. Also, it is more likely that the overfitting does not exceed 10 coefficients. These results are important as quantifying the extent to which these variables are subject to overfitting risk when represented by AR models. The potential problems carried by overfitting includes: (i) the spurious regression, (ii) distort the estimation of impulse response function, and (iii) affect the predictive accuracy of the variable of interest. The latter problem is analyzed in detail.
Item Type:  MPRA Paper 

Original Title:  Probabilidad Clásica de Sobreajuste con Criterios de Información: Estimaciones con Series Macroeconómicas Chilenas 
English Title:  Classical Probability of Overfitting with Information Criteria: Estimations with Chilean Macroeconomic Series 
Language:  Spanish 
Keywords:  Nonparametric modelling; information criteria; overfitting; outofsample analysis 
Subjects:  C  Mathematical and Quantitative Methods > C2  Single Equation Models ; Single Variables > C22  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C51  Model Construction and Estimation E  Macroeconomics and Monetary Economics > E2  Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E23  Production E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E31  Price Level ; Inflation ; Deflation E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E37  Forecasting and Simulation: Models and Applications 
Item ID:  57401 
Depositing User:  Carlos A. Medel 
Date Deposited:  23 Jul 2014 01:23 
Last Modified:  15 Jun 2016 18:48 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/57401 