Week 4 & 5 Flashcards by M d Heijer

Q

What is the idea of VECM models?

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Q

What are the mean, variance, autocovariance and autocorrelations of a AR(1) random walk process?

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Q

When is a process integrated with an order of 1? How can it be made stable? How can this be generalized?

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Q

When is differencing components in a time series process d times (i.e., where d is the number roots in the unit circle), not ideal?

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Q

What is the idea of a cointegrated process?

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Q

What is the idea of a cointegrated process?

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Q

Describe a general (simple) ECM model.

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Q

How to write a VECM model as a VAR model? What does this mean?

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Q

How to rewrite a (unstable) VAR(2) to a VECM model?

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Q

Why is cointegration important?

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Q

When is a VAR(p) process called cointegrated?

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Q

What are the other options for r (the rank of matrix Pi)?

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Q

What is the VECM representation? What are the parameters of a VAR process (using the variables of a VECM)?

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Q

How is a constant included in a VECM model?

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Q

How to interpret estimates of a VECM model?

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Q

What is a vector space?

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Q

What is a vector subspace?

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Q

What is the orthogonal complement?

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Q

What is a projection?

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Q

What is the Frisch-Waugh-Lovell theorem?

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Q

Why is the Frisch-Waugh-Lovell theorem needed?

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Q

Describe a VECM without deterministic terms.

I.e., what is the notation

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Q

What is the VECM in stacked matrix notation?

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Q

How can we estimate a VECM using LS? When and or why would we do this?

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A

Do the two asymptotic properties hold with a VECM estimation? If they do, why and when?

What could be the advantage of ML estimation for a VECM? What are some of its additional assumptions?

What is the likelyhood function of an ML estimation of a VECM? | What do we maximize

How to concentrate Γ out of the likelyhood function? | Of VECM obv.

How to concentrate Σ\_u out of the likelyhood function? | Of VECM

How to concentrate out 𝛼 out of the likelyhood function? | Of VECM

How to maximize β of the likelyhood function? | Of the VECM part

What is the maximalized likelyhood function of a VECM model?

In short: What are the values of the variables of the maximized likelyhood function?

How to select the lag order for a VECM model?

How do you test for the cointegration rank? | VECM