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Re: st: ARMA(1,1) with Multiple Panels

From (Vince Wiggins, StataCorp)
Subject   Re: st: ARMA(1,1) with Multiple Panels
Date   Tue, 22 Aug 2006 12:48:56 -0500

Alexander Gelber <> asks,

> Which Stata commands should I use to estimate an ARMA(1,1) process
> in a panel dataset with multiple panels?
> The problem is that when I just use the normal command to estimate
> an ARMA(1,1), it gives me an error message:
>  arima dep ind, arima(1,0,1)
> sample may not include multiple panels
> r(459);

Alexander appears willing to assume that the same process holds across his
panels.  In that case, he can add the -condition- option to his -arima-
command to produce conditional rather unconditional maximum likelihood
estimates of the parameters.  

These are simply different estimators of the same parameters, but the
conditional estimator is conditional on simple rules for starting the process
at the beginning of the sample, whereas the unconditional estimator starts the
process using the optimal solution from the current parameter estimates.  This
means that the conditional estimator is amenable to restarting the time-series
process at each panel break whereas the unconditional estimator is not.

-- Vince

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