Statalist The Stata Listserver

[Date Prev][Date Next][Thread Prev][Thread Next][Date index][Thread index]

st: R-squared with ARIMA

From   Kit Baum <>
Subject   st: R-squared with ARIMA
Date   Thu, 15 Jun 2006 11:47:45 -0400

Danielle said

I am estimating a series of models using -arima- (ar(1) & arma(1,1)). I will
be presenting the results to a group w/ very little, if any, econometric
knowledge, and would like to compute the R-squared, since the interpretation
of BIC is not easy for the general public.

I know that the R-squared with MLE is not valid for comparing models, but is
it ok to use it as a general measure of goodness of fit of individual models?

Assuming the answer to this is yes... I can easily compute R-squared =
(TSS-RSS)/TSS, where TSS = sum of squares of y-ybar and RSS = sum of squares
of y-yhat. Sometimes this formula is presented as R-squared = RSS/ TSS. I know
that these 2 formulas are equivalent w/ OLS. BUT, experimentation has shown me
that they are not equivalent w/ -arima-. Can someone verify this?

A measure of R^2 that does not depend on the method of computation is the squared correlation between observed and in-sample forecast values. Indeed, the forecast values could come from a subjective process or a crystal ball. But if you can generate in-sample forecasts from your models, you can always compute this measure.

Kit Baum, Boston College Economics

* For searches and help try:

© Copyright 1996–2022 StataCorp LLC   |   Terms of use   |   Privacy   |   Contact us   |   What's new   |   Site index