Title stata.

com
arima postestimation — Postestimation tools for arima

Postestimation commands predict margins Remarks and examples

Reference Also see

Postestimation commands
The following postestimation commands are of special interest after arima:
Command Description
estat acplot estimate autocorrelations and autocovariances
estat aroots check stability condition of estimates
irf create and analyze IRFs
psdensity estimate the spectral density

The following standard postestimation commands are also available:

Command Description
estat ic Akaike’s and Schwarz’s Bayesian information criteria (AIC and BIC)
estat summarize summary statistics for the estimation sample
estat vce variance–covariance matrix of the estimators (VCE)
estimates cataloging estimation results
forecast dynamic forecasts and simulations
lincom point estimates, standard errors, testing, and inference for linear combinations
of coefficients
lrtest likelihood-ratio test
margins marginal means, predictive margins, marginal effects, and average marginal
effects
marginsplot graph the results from margins (profile plots, interaction plots, etc.)
nlcom point estimates, standard errors, testing, and inference for nonlinear combinations
of coefficients
predict predictions, residuals, influence statistics, and other diagnostic measures
predictnl point estimates, standard errors, testing, and inference for generalized predictions
test Wald tests of simple and composite linear hypotheses
testnl Wald tests of nonlinear hypotheses

1
 2 arima postestimation — Postestimation tools for arima

predict

Description for predict

predict creates a new variable containing predictions such as expected values and mean squared
errors. All predictions are available as static one-step-ahead predictions or as dynamic multistep
predictions, and you can control when dynamic predictions begin.

Menu for predict

Statistics > Postestimation

Syntax for predict

       
predict type newvar if in , statistic options

statistic Description
Main
xb predicted values for mean equation—the differenced series; the default
stdp standard error of the linear prediction
y predicted values for the mean equation in y —the undifferenced series
mse mean squared error of the predicted values
residuals residuals or predicted innovations
yresiduals residuals or predicted innovations in y , reversing any time-series operators
These statistics are available both in and out of sample; type predict . . . if e(sample) . . . if wanted only for
the estimation sample.
Predictions are not available for conditional ARIMA models fit to panel data.

options Description
Options
dynamic(time constant) how to handle the lags of yt
t0(time constant) set starting point for the recursions to time constant
structural calculate considering the structural component only
time constant is a # or a time literal, such as td(1jan1995) or tq(1995q1); see
Conveniently typing SIF values in [D] Datetime.

Options for predict

Six statistics can be computed using predict after arima: the predictions from the model (the
default also given by xb), the standard error of the linear prediction (stdp), the predictions after
reversing any time-series operators applied to the dependent variable (y), the MSE of xb (mse), the
predictions of residuals or innovations (residual), and the predicted residuals or innovations in terms
of y (yresiduals). Given the dynamic nature of the ARMA component and because the dependent
variable might be differenced, there are other ways of computing each. We can use all the data on
the dependent variable that is available right up to the time of each prediction (the default, which is
 arima postestimation — Postestimation tools for arima 3

often called a one-step prediction), or we can use the data up to a particular time, after which the
predicted value of the dependent variable is used recursively to make later predictions (dynamic()).
Either way, we can consider or ignore the ARMA disturbance component (the component is considered
by default and is ignored if you specify structural).
All calculations can be made in or out of sample.

 Main
xb, the default, calculates the predictions from the model. If D.depvar is the dependent variable,
these predictions are of D.depvar and not of depvar itself.
stdp calculates the standard error of the linear prediction xb. stdp does not include the variation
arising from the disturbance equation; use mse to calculate standard errors and confidence bands
around the predicted values.
y specifies that predictions of depvar be made, even if the model was specified in terms of, say,
D.depvar.
mse calculates the MSE of the predictions.
residuals calculates the residuals. If no other options are specified, these are the predicted innovations
t ; that is, they include the ARMA component. If structural is specified, these are the residuals
µt from the structural equation; see structural below.
yresiduals calculates the residuals in terms of depvar, even if the model was specified in terms of,
say, D.depvar. As with residuals, the yresiduals are computed from the model, including any
ARMA component. If structural is specified, any ARMA component is ignored, and yresiduals
are the residuals from the structural equation; see structural below.

 Options
dynamic(time constant) specifies how lags of yt in the model are to be handled. If dynamic() is
not specified, actual values are used everywhere that lagged values of yt appear in the model to
produce one-step-ahead forecasts.
dynamic(time constant) produces dynamic (also known as recursive) forecasts. time constant
specifies when the forecast is to switch from one step ahead to dynamic. In dynamic forecasts,
references to yt evaluate to the prediction of yt for all periods at or after time constant; they
evaluate to the actual value of yt for all prior periods.
For example, dynamic(10) would calculate predictions in which any reference to yt with t < 10
evaluates to the actual value of yt and any reference to yt with t ≥ 10 evaluates to the prediction of
yt . This means that one-step-ahead predictions are calculated for t < 10 and dynamic predictions
thereafter. Depending on the lag structure of the model, the dynamic predictions might still refer
some actual values of yt .
You may also specify dynamic(.) to have predict automatically switch from one-step-ahead to
dynamic predictions at p + q , where p is the maximum AR lag and q is the maximum MA lag.
t0(time constant) specifies the starting point for the recursions to compute the predicted statistics;
disturbances are assumed to be 0 for t < t0(). The default is to set t0() to the minimum t
observed in the estimation sample, meaning that observations before that are assumed to have
disturbances of 0.
t0() is irrelevant if structural is specified because then all observations are assumed to have
disturbances of 0.
t0(5) would begin recursions at t = 5. If the data were quarterly, you might instead type
t0(tq(1961q2)) to obtain the same result.
 4 arima postestimation — Postestimation tools for arima

The ARMA component of ARIMA models is recursive and depends on the starting point of the
predictions. This includes one-step-ahead predictions.
structural specifies that the calculation be made considering the structural component only, ignoring
the ARMA terms, producing the steady-state equilibrium predictions.

margins

Description for margins

margins estimates margins of response for expected values.

Menu for margins

Statistics > Postestimation

Syntax for margins

   
margins marginlist , options
     
margins marginlist , predict(statistic . . . ) predict(statistic . . . ) . . . options

statistic Description
xb predicted values for mean equation—the differenced series; the default
y predicted values for the mean equation in y —the undifferenced series
stdp not allowed with margins
mse not allowed with margins
residuals not allowed with margins
yresiduals not allowed with margins

Statistics not allowed with margins are functions of stochastic quantities other than e(b).
For the full syntax, see [R] margins.

Remarks and examples stata.com

Remarks are presented under the following headings:
Forecasting after ARIMA
IRF results for ARIMA

Forecasting after ARIMA

We assume that you have already read [TS] arima. In this section, we illustrate some of the features
of predict after fitting ARIMA, ARMAX, and other dynamic models by using arima. In example 2
of [TS] arima, we fit the model

∆ ln(wpit ) = β0 + ρ1 {∆ ln(wpit−1 ) − β0 } + θ1 t−1 + θ4 t−4 + t

 arima postestimation — Postestimation tools for arima 5

by typing
. use https://www.stata-press.com/data/r16/wpi1
. arima D.ln_wpi, ar(1) ma(1 4)
(output omitted )

If we use the command

. predict xb, xb

then Stata computes xbt as

xbt = βb0 + ρb1 {∆ ln(wpit−1 ) − βb0 } + θb1 b

t−1 + θb4 b
t−4

where
∆ ln(wpit−j ) − xbt−j t−j >0
n
t−j =
b
0 otherwise
meaning that predict newvar, xb calculates predictions by using the metric of the dependent variable.
In this example, the dependent variable represented changes in ln(wpit ), and so the predictions are
likewise for changes in that variable.
If we instead use
. predict y, y

Stata computes yt as yt = xbt + ln(wpit−1 ) so that yt represents the predicted levels of ln(wpit ). In
general, predict newvar, y will reverse any time-series operators applied to the dependent variable
during estimation.
If we want to ignore the ARMA error components when making predictions, we use the structural
option,
. predict xbs, xb structural

which generates xbst = βb0 because there are no regressors in this model, and
. predict ys, y structural

generates yst = βb0 + ln(wpit−1 )

Example 1: Dynamic forecasts

An attractive feature of the arima command is the ability to make dynamic forecasts. In example 4
of [TS] arima, we fit the model

consumpt = β0 + β1 m2t + µt
µt = ρµt−1 + θt−1 + t

First, we refit the model by using data up through the first quarter of 1978, and then we will evaluate
the one-step-ahead and dynamic forecasts.
. use https://www.stata-press.com/data/r16/friedman2
. keep if time<=tq(1981q4)
(67 observations deleted)
. arima consump m2 if tin(, 1978q1), ar(1) ma(1)
(output omitted )
6 arima postestimation — Postestimation tools for arima

To make one-step-ahead forecasts, we type

. predict chat, y
(52 missing values generated)

(Because our dependent variable contained no time-series operators, we could have instead used
predict chat, xb and accomplished the same thing.) We will also make dynamic forecasts,
switching from observed values of consump to forecasted values at the first quarter of 1978:
. predict chatdy, dynamic(tq(1978q1)) y
(52 missing values generated)

The following graph compares the forecasted values to the observed values for the first few years
following the estimation sample:

Personal consumption
2000 1800
Billions of dollars
1400 1600
1200

1977q1 1978q1 1979q1 1980q1 1981q1 1982q1

Quarter

Observed One−step−ahead forecast

Dynamic forecast (1978q1)

The one-step-ahead forecasts never deviate far from the observed values, though over time the
dynamic forecasts have larger errors. To understand why that is the case, rewrite the model as

consumpt = β0 + β1 m2t + ρµt−1 + θt−1 + t

= β0 + β1 m2t + ρ consumpt−1 − β0 − β1 m2t−1 + θt−1 + t

This form shows that the forecasted value of consumption at time t depends on the value of consumption
at time t − 1. When making the one-step-ahead forecast for period t, we know the actual value of
consumption at time t − 1. On the other hand, with the dynamic(tq(1978q1)) option, the forecasted
value of consumption for period 1978q1 is based on the observed value of consumption in period
1977q4, but the forecast for 1978q2 is based on the forecast value for 1978q1, the forecast for 1978q3
is based on the forecast value for 1978q2, and so on. Thus, with dynamic forecasts, prior forecast
errors accumulate over time. The following graph illustrates this effect.
 arima postestimation — Postestimation tools for arima 7

Forecast error

0 −50
Forecast − Actual
−150 −100
−200

1978q1 1979q1 1980q1 1981q1 1982q1

Quarter

One−step−ahead forecast Dynamic forecast (1978q1)

IRF results for ARIMA

We assume that you have already read [TS] irf and [TS] irf create. In this section, we illustrate
how to calculate the impulse–response function (IRF) of an ARIMA model.

Example 2
Consider a model of the quarterly U.S. money supply, as measured by M1, from Enders (2004).
Enders (2004, 93–97) discusses why seasonal shopping patterns cause seasonal effects in M1. The
variable lnm1 contains data on the natural log of the money supply. We fit seasonal and nonseasonal
ARIMA models and compare the IRFs calculated from both models.
We fit the following nonseasonal ARIMA model

∆∆4 lnm1t = ρ1 (∆∆4 lnm1t−1 ) + ρ4 (∆∆4 lnm1t−4 ) + t

The code below fits the above model and saves a set of IRF results to a file called myirf.irf.
8 arima postestimation — Postestimation tools for arima

. use https://www.stata-press.com/data/r16/m1nsa, clear

(U.S. money supply (M1) from Enders (2004), 95-99.)
. arima DS4.lnm1, ar(1 4) noconstant nolog
ARIMA regression
Sample: 1961q2 - 2008q2 Number of obs = 189
Wald chi2(2) = 78.34
Log likelihood = 579.3036 Prob > chi2 = 0.0000

OPG
DS4.lnm1 Coef. Std. Err. z P>|z| [95% Conf. Interval]

ARMA
ar
L1. .3551862 .0503011 7.06 0.000 .2565979 .4537745
L4. -.3275808 .0594953 -5.51 0.000 -.4441895 -.210972

/sigma .0112678 .0004882 23.08 0.000 .0103109 .0122246

Note: The test of the variance against zero is one sided, and the two-sided
confidence interval is truncated at zero.
. irf create nonseasonal, set(myirf) step(30)
(file myirf.irf created)
(file myirf.irf now active)
(file myirf.irf updated)

We fit the following seasonal ARIMA model

(1 − ρ1 L)(1 − ρ4,1 L4 )∆∆4 lnm1t = t

The code below fits this nonseasonal ARIMA model and saves a set of IRF results to the active IRF
file, which is myirf.irf.
. arima DS4.lnm1, ar(1) mar(1,4) noconstant nolog
ARIMA regression
Sample: 1961q2 - 2008q2 Number of obs = 189
Wald chi2(2) = 119.78
Log likelihood = 588.6689 Prob > chi2 = 0.0000

OPG
DS4.lnm1 Coef. Std. Err. z P>|z| [95% Conf. Interval]

ARMA
ar
L1. .489277 .0538033 9.09 0.000 .3838245 .5947296

ARMA4
ar
L1. -.4688653 .0601248 -7.80 0.000 -.5867076 -.3510229

/sigma .0107075 .0004747 22.56 0.000 .0097771 .0116379

Note: The test of the variance against zero is one sided, and the two-sided
confidence interval is truncated at zero.
. irf create seasonal, step(30)
(file myirf.irf updated)

We now have two sets of IRF results in the file myirf.irf. We can graph both IRF functions side
by side by calling irf graph.
 arima postestimation — Postestimation tools for arima 9

. irf graph irf

nonseasonal, DS4.lnm1, DS4.lnm1 seasonal, DS4.lnm1, DS4.lnm1

1

.5

−.5

0 10 20 30 0 10 20 30

step
95% CI impulse−response function (irf)
Graphs by irfname, impulse variable, and response variable

The trajectories of the IRF functions are similar: each figure shows that a shock to lnm1 causes a
temporary oscillation in lnm1 that dies out after about 15 time periods. This behavior is characteristic
of short-memory processes.

See [TS] psdensity for an introduction to estimating spectral densities using the parameters estimated
by arima.

Reference
Enders, W. 2004. Applied Econometric Time Series. 2nd ed. New York: Wiley.

Also see
[TS] arima — ARIMA, ARMAX, and other dynamic regression models
[TS] estat acplot — Plot parametric autocorrelation and autocovariance functions
[TS] estat aroots — Check the stability condition of ARIMA estimates
[TS] irf — Create and analyze IRFs, dynamic-multiplier functions, and FEVDs
[TS] psdensity — Parametric spectral density estimation after arima, arfima, and ucm
[U] 20 Estimation and postestimation commands