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Estimates a standard VAR(1)

Source: R/VAR.R
VAR.Rd

Estimates a standard VAR(1)

Usage

VAR(RiskFactors, VARtype, Bcon_Mat = NULL)

Arguments

RiskFactors

numeric matrix (K x Td). Time series of risk factors.

VARtype

character. Permissible choices: "unconstrained" or "constrained".

Bcon_Mat

matrix (K x K + 1). Constraints matrix (includes intercept). Entries containing NAs are treated as free parameters. Default is NULL.

Value

list. Contains:

  • intercept (K x 1)

  • feedback matrix (K x K)

  • variance-covariance matrix (K x K) of a VAR(1)

General Notation

  • Td: model time series dimension

  • N: number of country-specific spanned factors

  • K: total number of risk factors

Examples

data(RiskFacFull)
# Example 1: unconstrained case
VAR_para1 <- VAR(RiskFacFull, VARtype = "unconstrained")

# Example 2: constrained case
K <- nrow(RiskFacFull)
Bcon_Mat <- matrix(0, nrow = K, ncol = K + 1)
Bcon_Mat[, 1:3] <- NaN
VAR_para2 <- VAR(RiskFacFull, VARtype = "constrained", Bcon_Mat)