The Bayesian information criterion (BIC) or Schwarz criterion (SIC) is a measure of the goodness of fit of a statistical model. It is often used as a criterion for model selection among a finite set of models. It is based on the log-likelihood function (LLF) and closely related to Akaike's information criterion.
Similar to AIC, the BIC introduces a penalty term for the number of parameters in the model, but the penalty is larger than one in the AIC.
- In general, the BIC is defined as:
- $k$ is the number of model parameters.
- $\ln(L)$ is the log-likelihood function for the statistical model.
- Given any two estimated models, the model with the lower value of BIC is preferred; a lower BIC implies either fewer explanatory variables, better fit, or both.
- It is essential to remember that the BIC can be used to compare estimated models only when the numerical values of the dependent variable are identical for all estimates being compared.
- BIC has been widely used for model identification in time series and linear regression. It can, however, be applied quite widely to any set of maximum likelihood-based models.
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