Minimum Description Length Principle in Discriminating Marginal Distributions

2010 Mathematics Subject Classification: 94A17, 62B10, 62F03.

In this paper the MDL principle is explored in discriminating between a model with normal marginal distributions vs a model with Student-T marginal distributions. The shape complexity of a distribution is defined with insights from the closed-form solution for model complexity for normal distribution. An optimised numerical approach for the Student-T distribution is devised with the aim of extending it to the fat-tailed distributions commonly found in econometric time series.