Language Reference

VARMALIK Call

computes the log-likelihood function for a VARMA(p,q) model

CALL VARMALIK( lnl, series, phi, theta, sigma <, p, q, opt> );

The inputs to the VARMALIK subroutine are as follows:


series
specifies an nx k matrix containing the vector time series (assuming mean zero), where n is the number of observations and k\geq 2 is the number of variables.

phi
specifies a km_p x k matrix containing the autoregressive coefficient matrices, where m_p is the number of the elements in the subset of the AR order. You must specify either phi or theta.

theta
specifies a km_q x k matrix containing the moving-average coefficient matrices, where m_q is the number of the elements in the subset of the MA order. You must specify either phi or theta.

sigma
specifies a k x k covariance matrix of the innovation series. If you do not specify sigma, an identity matrix is used.

p
specifies the subset of the AR order. See the VARMACOV subroutine.

q
specifies the subset of the MA order. See the VARMACOV subroutine.

opt
specifies the method of computing the log-likelihood function:



opt=0
requests the multivariate innovations algorithm. This algorithm requires that the time series is stationary and does not contain missing observations.
opt=1
requests the conditional log-likelihood function. This algorithm requires that the number of the observations in the time series must be greater than p+q and that the series does not contain missing observations.
opt=2
requests the Kalman filtering algorithm. This is the default and is used if the required conditions in opt=0 and opt=1 are not satisfied.

The VARMALIK subroutine returns the following value:


lnl
is a 3 x 1 matrix containing the log-likelihood function, the sum of log determinant of the innovation variance, and the weighted sum of squares of residuals. The log-likelihood function is computed as -0.5x (the sum of last two terms).

The options opt=0 and opt=2 are equivalent for stationary time series without missing values. Setting opt=0 is useful for a small number of the observations and a high order of p and q; opt=1 is useful for a high order of p and q; opt=2 is useful for a low order of p and q, or for missing values in the observations.

Consider the following bivariate (k=2) VARMA(1,1) model:
y_t = \phi y_{t-1} +    {\epsilon}_t - \theta {\epsilon}_{t-1}

\phi=[\matrix{1.2 & -0.5 \cr    0.6 & 0.3 \cr    }]   \theta=[\matrix{-0.6 & 0.3 \cr    0.3 & 0.6 \cr    }]   \sigma=[\matrix{1.0 & 0.5 \cr    0.5 & 1.25\cr    }]
To compute the log-likelihood function of this model, you can use the following statements:
  
   phi  = { 1.2 -0.5, 0.6 0.3 }; 
   theta= {-0.6  0.3, 0.3 0.6 }; 
   sigma= { 1.0  0.5, 0.5 1.25}; 
   call varmasim(yt, phi, theta) sigma=sigma; 
   call varmalik(lnl, yt, phi, theta, sigma);
 

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