Bayesian Model Selection for Misspecified Models in Linear Regression

Abstract: While the Bayesian Information Criterion (BIC) and Akaike Information Criterion (AIC) are powerful tools for model selection in linear regression, they are built on different prior assumptions and thereby apply to different data generation scenarios. We show that in the finite-dimensional case their respective assumptions can be unified within an augmented model-plus-noise space and construct a prior in this space which inherits the beneficial properties of both AIC and BIC. This allows us to adapt the BIC to be robust against misspecified models where the signal to noise ratio is low.