I am fitting an Error Correction Model with two monthly price time series.
In Stata I am using the
varsoc command to determine the number of lags that are appropriate.
varsoc variable1 variable2
If I run
varsoc with the default 4
maxlags, the suggested lag length using AIC/FPE is 3.
However, if I run varsoc with
maxlag(12) option, 12 lags are suggested.
If I use
maxlag(20), 13 lags are suggested.
- Why is
varsocso sensitive to the number of
- If this is the case, how should I decide which
maxlagto use? Running
varsocon the time series seperately yields 8 lags (if a larger