On the Recursive Fitting of Subset Autoregressions - Financial and Economic Forecasting (Chapter 1)

37 Pages Posted: 19 Dec 2002

See all articles by Jack H.W. Penm

Jack H.W. Penm

Australian National University - School of Finance and Applied Statistics, Faculty of Economics and Commerce

Jammie H. Penm

Independent

R. Deane Terrell

Australian National University (ANU) - National Graduate School of Management

Date Written: October 2002

Abstract

The paper comprises the preface and chapter 1 of the book titled "Financial and Economic Forecasting" (Authors: Penm-Penm-Terrell; Publication date: October 2002). The preface provides explanatory remarks at the beginning of the book. It briefly introduces theoretical developments and empirical applications presented in the book. In contrast to conventional methods, the presence of subset structure and zero entries in zero-non-zero (ZNZ) patterned time-series modelling and forecasting has been explicitly explored.

In fitting a vector autoregressive process which may include lags up to and including lag K, we may wish to search for the subset vector autoregressive process of size k (where k is the number of lags with non-zero coefficient matrices, k = 1, 2, . . . , K) which has the minimum generalized residual variance. Chapter 1 provides a recursive procedure, which is initialized by evaluating all 'forward' and 'backward' autoregressions in which k = 1. The recursion then allows one to develop successively all subsets of size k = 2, k = 3 up to k = K.

Keywords: Algorithm, Recursive fitting, Subset vector autoregressions, Vector autoregressions

JEL Classification: C10, C63

Suggested Citation

Penm, Jack and Penm, Jammie H. and Terrell, R. Deane, On the Recursive Fitting of Subset Autoregressions - Financial and Economic Forecasting (Chapter 1) (October 2002). Available at SSRN: https://ssrn.com/abstract=354560 or http://dx.doi.org/10.2139/ssrn.354560

Jack Penm (Contact Author)

Australian National University - School of Finance and Applied Statistics, Faculty of Economics and Commerce ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 (02) 61250535 (Phone)
+61 (02) 61250087 (Fax)

Jammie H. Penm

Independent ( email )

61 (02) 62880126 (Phone)
61 (02) 61250087 (Fax)

R. Deane Terrell

Australian National University (ANU) - National Graduate School of Management ( email )

Sir Roland Wilson Building (120)
Canberra, Australian Capital Territory 0200
Australia

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