The RATS Software Forum

Dear Tom,

I have a question about what exactly VCV procedure calculates. I have two series, RGDP and UR. In Excel, CORREL function gives me one result (0.50225) and in RATS VCV command gives me a different result (0.97051).

I read in the manual that VCV computes a residual covariance matrix. But what is the exact formula? What residuals do they take as series? From LINREG?

The excel file with the raw data is attached.

I have tried

cross(org=column,from=0,to=0) UR RGDP

and

CMOMENT(CORR,PRINT)
# RGDP UR
WRITE %CMOM

and then received the same results as in Excel file. So now my question is what VCV is calculating.

Thank you very much.

Yelena

Without any other options, VCV computes the raw, uncentered covariance of the input series. The formula is in the User's Guide. It does not, itself, take residuals---it's usually applied to residuals. The Excel calculation subtracts means, which VCV will as well, if you use the CENTER option.

Oh, thank you, Tom. It works now.