Add factors

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Add factors

Postby meganmao » Wed Aug 07, 2013 1:05 pm

Hi, I'm using E-views 7.

I have a model that contains multiple equations predicting states' production levels. I'm regressing this on a margin value. This margin value is regional, so multiple states use the same margin value. The equations are not linked to each other. Some of the equations share variables, but that's about it.

I'm trying to use an add-factor but I'm not entirely sure what's going on because it's not doing what I think it's doing. The example in User Guide II is a little more complex, so it doesn't really answer my question.

This is what I do:
In my models window, I hit Proc/Add factors/Equation Assignment.

[x]All stochastic equations - No identities
[ ]All equations including identities
[ ]None- Remove all add factors
[x] Create baseline factor series if they do not already exist

[x]Equation intercept (residual) shift
[ ] Endogenous variable shift
[x] Do not change existing factors types. Selection applies only to new factors

I go to my equations list in the model and double click an equation: Properties/Add Factors/Add Factor Initialization

I select 'Zero' and my initialization period is my forecasting period. Then I make changes in the add factor variable.

When I solve the model and compare to my non-add-factor-ed forecast, I see that other states have been affected too, even when their add factor variable is all zeroes.

What is happening?

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