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how to identify error correction term
Posted: Wed Jul 09, 2014 9:46 pm
by upani
Dear All,
How do i identify the error correction term in CATS Anlaysis.
With regards,
Upananda
Re: how to identify error correction term
Posted: Wed Jul 09, 2014 10:18 pm
by TomDoan
What do you mean?
Re: how to identify error correction term
Posted: Wed Jul 09, 2014 10:53 pm
by upani
After estimating the cointegration, I am interested to estimate the vecm model
- vecm.jpg (15.01 KiB) Viewed 11027 times
. So i want to know the following parameter on error correction term on each equation for the spot and futures price respectively. I want to know how to get the parameter after estimating in CATS.
Re: how to identify error correction term
Posted: Thu Jul 10, 2014 12:32 pm
by TomDoan
While you can get that out of CATS, you're better off with a system like that to let CATS help you figure out the rank and do various diagnostics, but then have RATS actually estimate the VECM once you've settled on the specification. Use @JOHMLE to estimate the cointegration vector (it will give identical results for an identical model) and SYSTEM with an ECT instruction to set up the VECM. See Section 7.8 and Example 7.7 in the v8 User's Guide.