[R] Anyone Familiar with Using arima function with exogenous variables?

[Dirk Eddelbuettel]

On Mon, Apr 21, 2003 at 12:32:12PM -0400, Richard A. Bilonick wrote:
> I tried using arima to estimate the sales data (Series M in Box and 
> Jenkins) using the leading indicator. I think I estimated the same model 
> correctly. The AR and MA coefficients roughly agreed but the intercept 
> and coefficient for the leading indicator were very different. The 
> intercept was 10 times too large (approximately) and the coefficient for 
> the leading indicator was about 1/10 of that shown in B&J.
> 
> So far I haven't located any simple examples to try.

Why don't you try simulation?  

Create some data under the 'null' you're trying to get to, say, y <-
seq(1,n) + arima.error where arima.error could be as simple as an AR(1) or
MA(1). Then estimate the model, using 90% or 95% of the data and evaluate
the forecast to the retained 10% or 5%. Repeat the DGP creation, estimation,
forecast evaluation steps N (say 500) times and you should have a good idea
about the merits of predict.arima.

Dirk

-- 
Don't drink and derive. Alcohol and algebra don't mix.