Re: [Gretl-devel] Bug (?) in hi-freq lag counting of midas
On Mon, 10 Jul 2017, Sven Schreiber wrote:
[...] I think there are special cases (of Almon?) where you can
reduce the whole thing to a single parameter? So it's not always
absurd to have only two or even one lag.
I don't mean to drive this into the ground, but on reflection
including only 2 lags with any of the MIDAS hyperparameterizations
is definitely the wrong thing to do. If you want only two lags, use
the unrestricted (U-MIDAS) specification. Otherwise you're in effect
forcing the algorithm to estimate a smooth decay function with only
two data-points, and this cannot go well.
Things are even worse with the regular beta option, which forces the
weight on the last lag to zero: including two lags is in effect
including just one lag. This is explained in
http://gretl.sourceforge.net/midas/midas_gretl.pdf at
http://gretl.sourceforge.net/midas/
Allin