[R-SIG-Finance] [R-sig-finance] VAR process

RON70 ron_michael70 at yahoo.com
Tue Jan 27 03:42:10 CET 2009


More than one week, still no suggestion. Is my question not understandable
or answerable?

RON70 wrote:
> Hi,
> In every book on VAR [Vector auto regression] I see that, any VAR [p]
> process can be expressed as a VAR [1] process. Here my question is how it
> can be possible? When you change it to a VAR [1] process, the VCV matrix
> of Innovations contains zero and hence it is not of full rank. Therefore
> it is not a PD matrix, you cannot decompose that according cholesky
> decomposition and lot more things can not be done with it because VCV
> matrix is singular. Then how can that process be a VAR process?

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