How estimate VAR(p)-model robustly?
Irene Schreiber wrote:
Hello, Does anyone know about robust estimation of vector autoregressive models (VAR(p)) in R? Or in Matlab? Currently I am using the function ar(). The problem is, that the variances of my data change a lot with time, and we also have some outliers in the data. That is why, I presume, that we would get quite different results when estimating robustly. I would be very grateful if someone could help! Thanks a lot! Irene.
I'll try to remember to respond in greater detail after http://www.RinFinance.com/ this Friday/Saturday, but I'll suggest two avenues now. A Bayesian smoothing method should improve your forecasts. There are several Bayesian time series implementations in R. Also, you may want to take a look at our (Boudt,Peterson,Croux) Journal of Risk paper from last year and the Return.clean method implementation in PerformanceAnalytics, which implements a robust filtering of time series outliers aimed squarely at making better risk predictions out of sample. Regards, - Brian
Brian G. Peterson http://braverock.com/brian/ Ph: 773-459-4973 IM: bgpbraverock