VAR(1) model - Residuals

For technical questions regarding estimation of single equations, systems, VARs, Factor analysis and State Space Models in EViews. General econometric questions and advice should go in the Econometric Discussions forum.

Moderators: EViews Gareth, EViews Moderator

saraphdnz
Posts: 10
Joined: Wed Feb 24, 2021 4:36 pm

VAR(1) model - Residuals

Postby saraphdnz » Wed Mar 10, 2021 1:23 pm

Hello there,

I need some guidance regarding the VAR(1) model. I have six dependent variables and I need to use VAR(1) process to obtain the residuals for each of them and then use GARCH to forecast the conditional variance based on these residuals.
My question is that what difference it makes if I select all six variables together in VAR to make the residuals 'vs' select one at a time to obtain the VAR residuals?

Regards,
Sara

EViews Gareth
Fe ddaethom, fe welon, fe amcangyfrifon
Posts: 13305
Joined: Tue Sep 16, 2008 5:38 pm

Re: VAR(1) model - Residuals

Postby EViews Gareth » Wed Mar 10, 2021 1:36 pm

Not sure what you mean by this. Could you explain further?
Follow us on Twitter @IHSEViews

startz
Non-normality and collinearity are NOT problems!
Posts: 3775
Joined: Wed Sep 17, 2008 2:25 pm

Re: VAR(1) model - Residuals

Postby startz » Wed Mar 10, 2021 2:10 pm

A VAR is just a least squares regression. So as long as you use the same specification it doesn't matter if the equations are estimated together or separately.

saraphdnz
Posts: 10
Joined: Wed Feb 24, 2021 4:36 pm

Re: VAR(1) model - Residuals

Postby saraphdnz » Thu Mar 11, 2021 8:31 pm

Thanks for the reply.

I need the residuals for the eight dependent variables (stationary as well) via VAR and I can obtain them via Eviews selecting all together as dependent variables but the residuals are showing auto-correlation. although I selected the lag length as per SIC (via lag structure).
what should I need to do here? estimate them together or one by one? is the sequence of dependent variable also important in VAR?

Please advise.

Regards,
Sara

startz
Non-normality and collinearity are NOT problems!
Posts: 3775
Joined: Wed Sep 17, 2008 2:25 pm

Re: VAR(1) model - Residuals

Postby startz » Thu Mar 11, 2021 8:50 pm

saraphdnz wrote:Thanks for the reply.

I need the residuals for the eight dependent variables (stationary as well) via VAR and I can obtain them via Eviews selecting all together as dependent variables but the residuals are showing auto-correlation. although I selected the lag length as per SIC (via lag structure).
what should I need to do here? estimate them together or one by one? is the sequence of dependent variable also important in VAR?

Please advise.

Regards,
Sara

If you are doing a standard VAR then the order of the dependent variables does not matter and whether you do them individually or together doesn't matter. If you are still seeing autocorrelation you might add another lag.

saraphdnz
Posts: 10
Joined: Wed Feb 24, 2021 4:36 pm

Re: VAR(1) model - Residuals

Postby saraphdnz » Fri Mar 12, 2021 2:10 pm

Thanks, heaps for the explanation it is a big help.


Regards, Sara


Return to “Estimation”

Who is online

Users browsing this forum: No registered users and 34 guests