Multivariate Subset Autoregression - Financial and Economic Forecasting (Chapter 3)

Abstract

This chapter uses a modified block Choleski decomposition method and tree pruning algorithms to attain the best multivariate subset autoregression for each size (number of non-zero coefficient matrices). Model selection criteria are then employed to select the optimum multivariate subset AR. A Monte Carlo study of these techniques has been investigated to assess their performance, and comparisons of computational efficiency of the proposed procedures are also provided.

Keywords: block Choleski decomposition, Hocking's 1-lag reduction algorithm, leaps and bounds algorithm

JEL Classification: C22, C53, E31