I'm comparing different ARMA-GARCH specification out-of-sample in order to understand whether the more "parsimonious" models prescribed by BIC do not perform more poorly than the more "expensive" ones imposed by AIC.
Let's say for one of them I got a MSE=0.0031 for the MA(1), while MSE=0.0032 for ARMA(4,5).
- How can I say whether MSE=0.0031 is good or not? What does it mean practically (is the market inefficient)?
- Is the difference from MA(1) and ARMA(4,5) negligible or not? Is model 1 preferable? Why or why not?