## ARMA and explosive process

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maxchen
Posts: 191
Joined: Fri Oct 10, 2008 4:03 pm

### ARMA and explosive process

EV 9 32bit build 2016-06-29

for an explosive process, EV9 seems not able to find the true coefficient.

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`!T = 200   '400 will more explosivewfcreate u !Trndseed(type=mt) 12347genr e = 0.6*nrndgenr u = 0genr u2 = 0genr u3 = 0smpl @first+1 @lastu = 0.4*u(-1)+e         'U(1)=0, starting from unconditional meanu2 = 1.04*u2(-1) +e   'explosiveu3 = 1.04*u3(-1) -e   'explosive, u3 = -u2 !equation eq01.ls u ar(1)if @vernum>=9 then   equation eq02.ls(arma=cls) u2 ar(1)   'produce EV8 results in EV9; discard arma=cls in EV8else   equation eq02.ls u2 ar(1)endifequation eq029.ls u2 ar(1)      'ml, ar1<1equation eq029o.ls(optmethod=opg) u2 ar(1)show eq02show eq029if @vernum>=9 then   show eq02.resids   show eq029.residsendif`

you will see that EV9 use ML to estimate ARMA model, from eq029.resids, the residuals are not normal.
My question: does EV9 restrict the AR(1) coef to <=1 in estimation?

EViews Gareth
Fe ddaethom, fe welon, fe amcangyfrifon
Posts: 12266
Joined: Tue Sep 16, 2008 5:38 pm

### Re: ARMA and explosive process

No

maxchen
Posts: 191
Joined: Fri Oct 10, 2008 4:03 pm

### Re: ARMA and explosive process

for this data set, NLS seems better than ML

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`c(1) = 1.04c(2) = 0.6equation eq02u.ls(armastart=user,showopts) u2 ar(1)`

even given the true value as starting value, eq02u estimates the same values as eq029

EViews Gareth
Fe ddaethom, fe welon, fe amcangyfrifon
Posts: 12266
Joined: Tue Sep 16, 2008 5:38 pm

### Re: ARMA and explosive process

You should use nls on it then

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