[R] "xreg" in ARIMA modelling.

David Stoffer dsstoffer at gmail.com
Fri Nov 28 02:01:29 CET 2008

The help file states: "The exact likelihood is computed via a state-space
representation of the ARIMA process, and the innovations and their variance
found by a Kalman filter."   It is possible to include exogenous variables
(xreg) this way, but one can only assume this is done [only one person knows
for sure... the person who wrote the final version of arima(), and I hope he
chimes in to this].  If this is the case, then there is a likelihood
evaluation and AIC [or similar criteria, e.g., BIC and so on] would apply.

00alastair00 wrote:
> Hello, 
> Does anyone know how the parameter estimates are calculated for xreg
> variables when called as part of an arima() command, or know of any
> literature that provides this info?  In particular, I was wondering if
> there is a quick way to compare different combinations of "xreg" variables
> in the arima() fit in the same way that you would in multiple regression
> (using AIC & R^2 etc.).  
> Thanks very much!

The power of accurate observation is commonly called cynicism 
by those who have not got it.  George Bernard Shaw
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