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# estimate

Class: regARIMA

Estimate parameters of regression models with ARIMA errors

## Syntax

```EstMdl = estimate(Mdl,y) [EstMdl,EstParamCov,logL,info] = estimate(Mdl,y) [EstMdl,EstParamCov,logL,info] = estimate(Mdl,y,Name,Value) ```

## Description

`EstMdl = estimate(Mdl,y)` uses maximum likelihood to estimate the parameters of the regression model with ARIMA time series errors, `Mdl`, given the response series `y`. `EstMdl` is a `regARIMA` model that stores the results.

```[EstMdl,EstParamCov,logL,info] = estimate(Mdl,y)``` additionally returns `EstParamCov`, the variance-covariance matrix associated with estimated parameters, `logL`, the optimized loglikelihood objective function, and `info`, a data structure of summary information.

```[EstMdl,EstParamCov,logL,info] = estimate(Mdl,y,Name,Value)``` estimates the model using additional options specified by one or more `Name,Value` pair arguments.

## Input Arguments

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Regression model with ARIMA errors, specified as a `regARIMA` model returned by `regARIMA` or `estimate`.

`estimate` treats non-`NaN` elements in `Mdl` as equality constraints, and does not estimate the corresponding parameters.

Single path of response data to which the model is fit, specified as a numeric column vector. The last observation of `y` is the latest.

Data Types: `double`

### Name-Value Pair Arguments

Specify optional comma-separated pairs of `Name,Value` arguments. `Name` is the argument name and `Value` is the corresponding value. `Name` must appear inside quotes. You can specify several name and value pair arguments in any order as `Name1,Value1,...,NameN,ValueN`.

Initial estimates of ARIMA error model nonseasonal autoregressive coefficients, specified as the comma-separated pair consisting of `'AR0'` and a numeric vector.

The number of coefficients in `AR0` must equal the number of lags associated with nonzero coefficients in the nonseasonal autoregressive polynomial.

By default, `estimate` derives initial estimates using standard time series techniques.

Data Types: `double`

Initial estimates of regression coefficients, specified as the comma-separated pair consisting of `'Beta0'` and a numeric vector.

The number of coefficients in `Beta0` must equal the number of columns of `X`.

By default, `estimate` derives initial estimates using standard time series techniques.

Data Types: `double`

Command Window display option, specified as the comma-separated pair consisting of `'Display'` and a value or any combination of values in this table.

Valueestimate Displays
`'diagnostics'`Optimization diagnostics
`'full'`Maximum likelihood parameter estimates, standard errors, t statistics, iterative optimization information, and optimization diagnostics
`'iter'`Iterative optimization information
`'off'`No display in the Command Window
`'params'`Maximum likelihood parameter estimates, standard errors, and t statistics

For example:

• To run a simulation where you are fitting many models, and therefore want to suppress all output, use `'Display','off'`.

• To display all estimation results and the optimization diagnostics, use `'Display',{'params','diagnostics'}`.

Data Types: `char` | `cell` | `string`

Initial t-distribution degree-of-freedom estimate, specified as the comma-separated pair consisting of `'DoF0'` and a positive scalar. `DoF0` must exceed 2.

Data Types: `double`

Presample innovations that have mean 0 and provide initial values for the ARIMA error model, specified as the comma-separated pair consisting of `'E0'` and a numeric column vector. `E0` must contain at least `Mdl.Q` rows. If `E0` contains extra rows, then `estimate` uses the latest `Mdl.Q` presample innovations. The last row contains the latest presample innovation.

By default, `estimate` sets the necessary presample innovations to `0`.

Data Types: `double`

Initial regression model intercept estimate, specified as the comma-separated pair consisting of `'Intercept0'` and a scalar.

By default, `estimate` derives initial estimates using standard time series techniques.

Data Types: `double`

Initial estimates of ARIMA error model nonseasonal moving average coefficients, specified as the comma-separated pair consisting of `'MA0'` and a numeric vector.

The number of coefficients in `MA0` must equal the number of lags associated with nonzero coefficients in the nonseasonal moving average polynomial.

By default, `estimate` derives initial estimates using standard time series techniques.

Data Types: `double`

Optimization options, specified as the comma-separated pair consisting of `'Options'` and an `optimoptions` optimization controller. For details on altering the default values of the optimizer, see `optimoptions` or `fmincon` in Optimization Toolbox™.

For example, to change the constraint tolerance to `1e-6`, set `Options = optimoptions(@fmincon,'ConstraintTolerance',1e-6,'Algorithm','sqp')`. Then, pass `Options` into `estimate` using `'Options',Options`.

By default, `estimate` uses the same default options as `fmincon`, except `Algorithm` is `'sqp'` and `ConstraintTolerance` is `1e-7`.

Initial estimates of ARIMA error model seasonal autoregressive coefficients, specified as the comma-separated pair consisting of `'SAR0'` and a numeric vector.

The number of coefficients in `SAR0` must equal the number of lags associated with nonzero coefficients in the seasonal autoregressive polynomial.

By default, `estimate` derives initial estimates using standard time series techniques.

Data Types: `double`

Initial estimates of ARIMA error model seasonal moving average coefficients, specified as the comma-separated pair consisting of `'SMA0'` and a numeric vector.

The number of coefficients in `SMA0` must equal the number of lags with nonzero coefficients in the seasonal moving average polynomial.

By default, `estimate` derives initial estimates using standard time series techniques.

Data Types: `double`

Presample unconditional disturbances that provide initial values for the ARIMA error model, specified as the comma-separated pair consisting of `'U0'` and a numeric column vector. `U0` must contain at least `Mdl.P` rows. If `U0` contains extra rows, then `estimate` uses the latest presample unconditional disturbances. The last row contains the latest presample unconditional disturbance.

By default, `estimate` backcasts for the necessary amount of presample unconditional disturbances.

Data Types: `double`

Initial estimate of ARIMA error model innovation variance, specified as the comma-separated pair consisting of `'Variance0'` and a positive scalar.

By default, `estimate` derives initial estimates using standard time series techniques.

Data Types: `double`

Predictor data in the regression model, specified as the comma-separated pair consisting of `'X'` and a matrix.

The columns of `X` are separate, synchronized time series, with the last row containing the latest observations. The number of rows of `X` must be at least the length of `y`. If the number of rows of `X` exceeds the number required, then `estimate` uses the latest observations.

By default, `estimate` does not estimate the regression coefficients regardless of their presence in `Mdl`.

Data Types: `double`

### Notes

• `NaN`s in `y`, `E0`, `U0`, and `X` indicate missing values, and `estimate` removes them. The software merges the presample data (`E0` and `U0`) separately from the effective sample data (`X` and `y`), then uses list-wise deletion to remove any `NaN`s. Removing `NaN`s in the data reduces the sample size, and can also create irregular time series.

• `estimate` assumes that you synchronize the data (presample separately from effective sample) such that the latest observations occur simultaneously.

• The intercept of a regression model with ARIMA errors having nonzero degrees of seasonal or nonseasonal integration is not identifiable. In other words, `estimate` cannot estimate an intercept of a regression model with ARIMA errors that has nonzero degrees of seasonal or nonseasonal integration. If you pass in such a model for estimation, `estimate` displays a warning in the Command Window and sets `EstMdl.Intercept` to `NaN`.

• If you specify a value for `Display`, then it takes precedence over the specifications of the optimization options `Diagnostics` and `Display`. Otherwise, `estimate` honors all selections related to the display of optimization information in the optimization options.

## Output Arguments

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Model containing the parameter estimates, returned as a `regARIMA` model. `estimate` uses maximum likelihood to calculate all parameter estimates not constrained by `Mdl` (that is, all parameters in `Mdl` that you set to `NaN`).

Variance-covariance matrix of maximum likelihood estimates of model parameters known to the optimizer, returned as a matrix.

The rows and columns contain the covariances of the parameter estimates. The standard errors of the parameter estimates are the square root of the entries along the main diagonal. The rows and columns associated with any parameters held fixed as equality constraints contain `0`s.

`estimate` uses the outer product of gradients (OPG) method to perform covariance matrix estimation.

`estimate` orders the parameters in `EstParamCov` as follows:

• Intercept

• Nonzero `AR` coefficients at positive lags

• Nonzero `SAR` coefficients at positive lags

• Nonzero `MA` coefficients at positive lags

• Nonzero `SMA` coefficients at positive lags

• Regression coefficients (when you specify `X` in `estimate`)

• Innovations variance

• Degrees of freedom for the t distribution

Data Types: `double`

Optimized loglikelihood objective function value, returned as a scalar.

Data Types: `double`

Summary information, returned as a structure.

FieldDescription
`exitflag`Optimization exit flag (see `fmincon` in Optimization Toolbox)
`options`Optimization options controller (see `optimoptions` and `fmincon` in Optimization Toolbox)
`X`Vector of final parameter estimates
`X0`Vector of initial parameter estimates

For example, you can display the vector of final estimates by typing `info.X` in the Command Window.

Data Types: `struct`

## Examples

expand all

Fit this regression model with ARMA(2,1) errors to simulated data:

`$\begin{array}{l}\begin{array}{c}{y}_{t}={X}_{t}\left[\begin{array}{c}0.1\\ -0.2\end{array}\right]+{u}_{t}\\ {u}_{t}=0.5{u}_{t-1}-0.8{u}_{t-2}+{\epsilon }_{t}-0.5{\epsilon }_{t-1},\end{array}\end{array}$`

where ${\epsilon }_{t}$ is Gaussian with variance 0.1.

Specify the regression model ARMA(2,1) errors. Simulate responses from the model and two predictor series.

```Mdl = regARIMA('Intercept',0,'AR',{0.5 -0.8}, ... 'MA',-0.5,'Beta',[0.1 -0.2],'Variance',0.1); rng(1); X = randn(100,2); y = simulate(Mdl,100,'X',X);```

Specify a regression model with ARMA(2,1) errors with no intercept, and unknown coefficients and variance.

```ToEstMdl = regARIMA(2,0,1); ToEstMdl.Intercept = 0 % Exclude the intercept```
```ToEstMdl = regARIMA with properties: Description: "ARMA(2,1) Error Model (Gaussian Distribution)" Distribution: Name = "Gaussian" Intercept: 0 Beta: [1×0] P: 2 Q: 1 AR: {NaN NaN} at lags [1 2] SAR: {} MA: {NaN} at lag  SMA: {} Variance: NaN ```

The AR coefficients, MA coefficients, and the innovation variance are `NaN` values. `estimate` estimates those parameters, but not the intercept. The intercept is held fixed at 0.

Fit the regression model with ARMA(2,1) errors to the data.

`EstMdl = estimate(ToEstMdl,y,'X',X,'Display','params');`
``` Regression with ARMA(2,1) Error Model (Gaussian Distribution): Value StandardError TStatistic PValue ________ _____________ __________ __________ Intercept 0 0 NaN NaN AR{1} 0.6203 0.10419 5.9534 2.6267e-09 AR{2} -0.69717 0.079575 -8.7612 1.9315e-18 MA{1} -0.55808 0.1319 -4.2312 2.3243e-05 Beta(1) 0.10367 0.021735 4.7696 1.8456e-06 Beta(2) -0.20945 0.024188 -8.659 4.7574e-18 Variance 0.074885 0.0090358 8.2876 1.1558e-16 ```

The result, `EstMdl`, is a new `regARIMA` model. The estimates in `EstMdl` resemble the parameter values that generated the simulated data.

Fit a regression model with ARMA(1,1) errors by regressing the log GDP onto the CPI and using initial values.

Load the US Macroeconomic data set and preprocess the data.

```load Data_USEconModel; logGDP = log(DataTable.GDP); dlogGDP = diff(logGDP); % For stationarity dCPI = diff(DataTable.CPIAUCSL); % For stationarity T = length(dlogGDP); % Effective sample size```

Specify an "empty" regression model with ARMA(1,1) errors.

`ToEstMdl = regARIMA(1,0,1);`

Fit the model to the first half of the data.

```EstMdl0 = estimate(ToEstMdl,dlogGDP(1:ceil(T/2)),... 'X',dCPI(1:ceil(T/2)),'Display','off');```

The result is a new `regARIMA` model with the estimated parameters.

Use the estimated parameters as initial values for fitting the second half of the data.

```Intercept0 = EstMdl0.Intercept; AR0 = EstMdl0.AR{1}; MA0 = EstMdl0.MA{1}; Variance0 = EstMdl0.Variance; Beta0 = EstMdl0.Beta; [EstMdl,~,~,info] = estimate(ToEstMdl,... dlogGDP(floor(T/2)+1:end),'X',... dCPI(floor(T/2)+1:end),'Display','params',... 'Intercept0',Intercept0,'AR0',AR0,'MA0',MA0,... 'Variance0',Variance0,'Beta0',Beta0);```
``` Regression with ARMA(1,1) Error Model (Gaussian Distribution): Value StandardError TStatistic PValue __________ _____________ __________ ___________ Intercept 0.011174 0.002102 5.3158 1.0619e-07 AR{1} 0.78684 0.036229 21.718 1.3759e-104 MA{1} -0.47362 0.06554 -7.2264 4.9601e-13 Beta(1) 0.0021933 0.00058327 3.7604 0.00016966 Variance 4.8349e-05 4.1705e-06 11.593 4.4716e-31 ```

Display all of the parameter estimates using `info.X`.

`info.X`
```ans = 5×1 0.0112 0.7868 -0.4736 0.0022 0.0000 ```

The order of the parameter estimates in `info.X` matches the order that `estimate` displays in its output table.

## Algorithms

`estimate` estimates the parameters as follows:

1. Infer the unconditional disturbances from the regression model.

2. Infer the residuals of the ARIMA error model.

3. Use the distribution of the innovations to build the likelihood function.

4. Maximize the loglikelihood function with respect to the parameters using `fmincon`.

## References

 Box, G. E. P., G. M. Jenkins, and G. C. Reinsel. Time Series Analysis: Forecasting and Control. 3rd ed. Englewood Cliffs, NJ: Prentice Hall, 1994.

 Davidson, R., and J. G. MacKinnon. Econometric Theory and Methods. Oxford, UK: Oxford University Press, 2004.

 Enders, W. Applied Econometric Time Series. Hoboken, NJ: John Wiley & Sons, Inc., 1995.

 Hamilton, J. D. Time Series Analysis. Princeton, NJ: Princeton University Press, 1994.

 Pankratz, A. Forecasting with Dynamic Regression Models. John Wiley & Sons, Inc., 1991.

 Tsay, R. S. Analysis of Financial Time Series. 2nd ed. Hoboken, NJ: John Wiley & Sons, Inc., 2005.

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