THE RECURSIVE FITTING OF SUBSET VARX MODELS

Abstract. A vector time series model of the form A(L)y(t) + B(L)x(t) =ε(t) is known as a vector autoregressive model with exogenous variables (VARX model) and involves a regressand vector y(t) and a regressor vector x(t). This paper provides a method for the recursive fitting of subset VARX models. It suggests the use of ascending recursions in conjunction with an order selection criterion to choose an 'optimum' subset VARX model.