CODEWITHSUNDEEP
rstatistics
BlueTrin
BlueTrin

Reputation: 10063

In R, how to add an external variable to an ARIMA model?

Does anyone here know how I can specify additional external variables to an ARIMA model ?

In my case I am trying to make a volatility model and I would like to add the squared returns to model an ARCH.

The reason I am not using GARCH models, is that I am only interested in the volatility forecasts and the GARCH models present their errors on their returns which is not the subject of my study.

I would like to add an external variable and see the R^2 and p-values to see if the coefficient is statistically significant.

Upvotes: 1

Views: 3815

Answers (1)

Peter
Peter

Reputation: 104

I know that this is a very old question but for people like me who were wondering this you need to use cbind with xreg.

For Example: Arima(X,order=c(3,1,3),xreg = cbind(ts1,ts2,ts3))

Each external time series should be the same length as the original.

Upvotes: 2

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