I am using arima to develop a time series regression model, I am using arima
b/c I have autocorrelated errors. Several of my independent variables are
categorical and I have coded them as factors .  When I run ARIMA  I  don't
get any warning or error message, but I do not seem to get estimates for all
the levels of the factor. Can/how does ARIMA handle factors in xreg?


here is some example code:

sim.ar <- arima.sim(list(ar = c(0.4, 0.4)), n = 1000)
z<- factor(rep((1:5),200))

arima(sim.ar,order=c(2,0,0),xreg=z)


I  only get a single estiamte for xreg. Am I thinking about this wrong (I
expected 4).

thank you,


Spencer

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