I understand that when comparing two models we can use the log data density, but I’m not quite sure what log data density actually provide - I know that we normally choose the model with highest data density, but is this also the case with RBC-models where we are supposed to obtain high volatility?
If someone are able to provide me with additional information on this I would really appreciate it!
Sorry, the question is not about the volatility - it was if you/someone could provide me with some additional information of what I can obtain from the results of log data density and also whether i should choose the RBC with the highest density?