VARMALIK Call
computes the log-likelihood function for a VARMA() model
- CALL VARMALIK( lnl, series, phi, theta,
sigma <, p, q, opt> );
The inputs to the VARMALIK subroutine are as follows:
- series
- specifies an matrix containing the vector time series
(assuming mean zero), where is the number of observations and
is the number of variables.
- phi
- specifies a matrix
containing the autoregressive coefficient matrices,
where is the number of the elements in the subset
of the AR order.
You must specify either phi or theta.
- theta
- specifies a matrix
containing the moving-average coefficient matrices,
where is the number of the elements in the subset
of the MA order.
You must specify either phi or theta.
- sigma
- specifies a 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 pq 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 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 (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 (
) VARMA(1,1) model:
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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