A Simulation Study of Effects of Collinearity on Forecasting of Bivariate Time Series Data
Journal Title: Scholars Journal of Physics, Mathematics and Statistics - Year 2014, Vol 1, Issue 1
Abstract
Vector Autoregression (VAR) and Bayesian VAR (BVAR) were first introduced in the early eighties of the last century and have since proven to be practical and effective economic forecasting methodologies. This paper tends to study the forecasting performances of the unrestricted VAR model and four versions of the Sims-Zha BVAR models in the presence of collinearity using Monte Carlo simulation technique. We considered ten (10) collinearity levels (0.8, -0.8, 0.85, -0.85, 0.9, -0.9, 0.95, -0.95, 0.99 and -0.99), the results from our simulation study revealed that the forecasting performances of the models vary as the collinearity levels varied. Furthermore, the values of the criteria increases as the time series length and the collinearity levels increased. We therefore recommend that if VAR modelers know that collinearity is acting upon the model, one can choose the forecasting model that is preferred for the criteria and the time series length selected.
Authors and Affiliations
Adenomon M. O, Oyejola B. A.
Keywords
Related Articles
- EP ID EP383207
- DOI -
- Views 155
- Downloads 0
On The Binary Quadratic Diophantine Equation x2-4xy+y2+14x=0
The binary quadratic equation represents a hyperbola. In this paper we obtain a sequence of its integral solutions and present a few interesting relations among them.
The Stability of the Triangular Points of the Restricted three Body Problem when both the Primaries are Triaxial Rigid Bodies
The location and the stability of the triangular points of the planar restricted three body problem have been discussed when both the primaries are triaxial rigid bodies considering the case of stationary rotational mot...
Zero Factorial
Factorials play a major role in many applications. In this work we will discuss the concepts of factorial and provide the proofs related to 0!=1. Finally we present the new variations of factorials with few examples
Study on Properties of Monotone Function
Firstly, this paper gives the conditions of the existence of four kinds of unilateral limits and limit values for monotone function; points out the relationship between the existence of four kinds of unilateral limits an...
A Comparison of Students’ Performance: An Application of Hotelling’s
This paper examined the equality of the performance of two sets of students: those who graduated in 2012/2013 and 2013/2014 academic sessions from the Department of Statistics, Abia State Polytechnic, Aba, Nigeria, based...