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Thanks :)

Hi, I cannot deal with specifying the following model R(t)= c + beta(t)*M + error beta(t)= X(t) + Y(t) X(t) = X(t-1) + error Y(t) = gamma*Y(t-1) + error X and Y are the two components. X is the random walk, Y - AR(1) processs. I don't know how to specify in EViews the state equation: beta(t)= X(t) +...

Thanks :)

Hi, Initially run the VAR model of your interest without caring for the optimal lag structure. From the VAR window now select: view/ lag structure / Lag length criteria. A new window appears where the Lag specification is desired. Specify the maximum lag length (depending on the frequency of your d...