Bayesian Identification of Multivariate Autoregressive Processes

Abstract

Identification is one of the most important stages of a time series analysis. This paper develops a direct Bayesian technique to identify the order of multivariate autoregressive processes. By employing the conditional likelihood function and a matrix normal-Wishart prior density, or Jeffrey' vague prior, the proposed identification technique is based on deriving the exact posterior probability mass function of the model order in a convenient form. Then one may easily evaluate the posterior probabilities of the model order and choose the order that maximizes the posterior mass function to be the suitable order of the time series data being analyzed. Assuming the bivariate autoregressive processes, a numerical study, with different prior mass functions, is carried out to assess the efficiency of the proposed technique. The analysis of the numerical results supports the adequacy of the proposed technique in identifying the orders of multivariate autoregressive processes.