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AIC vs BIC Model Selection

Medium · Statistics & Regression · Quant Trader interview question · model-selection, aic, bic, statistics, information-criteria

You are building a statistical model to predict stock returns using a large dataset of historical prices and economic indicators. You are considering several models with varying degrees of complexity (number of parameters). To choose the best model, you plan to use either the Akaike Information Criterion (AIC) or the Bayesian Information Criterion (BIC). Both AIC and BIC penalize model complexity to avoid overfitting. Which of these criteria penalizes model complexity more heavily for large samp