why except for the -1 factor?Trubador, this isn't really right. Estimates of Yt = pYt-1 + ut and Yt-Yt-1 = (p-1)Yt-1 + ut are econometrically identical except for the -1 factor.
Yt-Yt-1 = (p-1)Yt-1 + ut
Yt-Yt-1 = pYt-1Yt-1 + ut
Yt = pYt-1 + ut
Search found 2 matches
- Fri May 22, 2009 3:48 pm
- Forum: Estimation
- Topic: How to estimate a random walk model?
- Replies: 18
- Views: 61709
Re: How to estimate a random walk model?
Yt-Yt-1 = (p-1)Yt-1 + ut
Yt-Yt-1 = pYt-1Yt-1 + ut
Yt = pYt-1 + ut
- Fri May 22, 2009 2:37 pm
- Forum: Estimation
- Topic: How to estimate a random walk model?
- Replies: 18
- Views: 61709
Re: How to estimate a random walk model?
The correct form would be Yt-Yt-1 = (p-1)Yt-1 + ut. If the coefficient (p-1) is insignificant, then it means that the original series Yt follows a random walk. In EViews terms, you can type your equation as d(Y) = c(1)*Y(-1) in the estimate equation dialog box. Here the coefficient (c(1)) is exactl...