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

Question

Quizplus · Accepted Answer

The statement is false because an F-test is not appropriate for comparing non-nested models like Markov switching or threshold autoregressive models with linear models. These models have different structures and assumptions, making direct comparison using residual sums of squares and an F-test not valid.

To Compare the Goodness of Fit of Markov Switching and Threshold