To Compare the Goodness of Fit of Markov Switching and Threshold

question 8

Multiple Choice

To compare the goodness of fit of Markov switching and threshold autoregressive models with linear models, one can compare the residual sums of squares of the two types of models using an F-test. Is the statement true?

• A) Yes
• B) No
• C) If the autoregressive model is restricted
• D) Cannot say without knowing the number of regimes in the regime switching models

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Definitions:

Industrialization

The process in which a society or country transforms itself from a primarily agrarian society into one based on the manufacturing of goods and services.

Privatization

The process of transferring ownership of a business, enterprise, agency, or public service from the government to private individuals or organizations.

Deregulation

The process of removing government regulations, oversight, and involvement from an industry.

Subsidization

Financial assistance granted by the government or an organization to support an economic sector, business, or consumer, making the goods or services more affordable.