Unobserved Components Model- Inclusion of Trend/Constant

timothymbanks — Fri, 23 Oct 2015 21:42:18 GMT

I would like to know if when developing a UCM model a constant always be included in the model? A co-worker(s) has raised this issue and to my knowledge I have communicated to them that most of the literature that I have researched there has been no literature stating that a constant should always be included in the model.

Re: Unobserved Components Model- Inclusion of Trend/Constant

rselukar — Thu, 29 Oct 2015 19:04:38 GMT

A constant or trend is NOT included in a UCM model by default. Similarly, an error component (IRREGULAR) is also NOT included by default. This is different from other procedures such as PROC REG or PROC ARIMA. Most often, the modeling of trend is the main purpose so it did not seem reasonable to include a particular type of trend (even a constant) as default.

Of course, this type of design decision is a matter of taste. At the time of UCM development, I decided that the simple REG case is rare.

topic Unobserved Components Model- Inclusion of Trend/Constant in SAS Forecasting and Econometrics

Unobserved Components Model- Inclusion of Trend/Constant

Re: Unobserved Components Model- Inclusion of Trend/Constant