Friday, March 25, 2016

MIDAS Regression is Now in EViews

The acronym, "MIDAS", stands for several things. In the econometrics literature it refers to "Mixed-Data Sampling" regression analysis. The term was coined by Eric Ghysels a few years ago in relation to some of the novel work that he, his students, and colleagues have undertaken. See Ghysels et al. (2004).

Briefly, a MIDAS regression model allows us to "explain" a (time-series) variable that's measured at some frequency, as a function of current and lagged values of a variable that's measured at a higher frequency. So, for instance, we can have a dependent variable that's quarterly, and a regressor that's measured at a monthly, or daily, frequency.

There can be more than one high-frequency regressor. Of course, we can also include other regressors that are measured at the low (say, quarterly) frequency, as well as lagged values of the dependent variable itself. So, a MIDAS regression model is a very general type of autoregressive-distributed lag model, in which high-frequency data are used to help in the prediction of a low-frequency variable.

There's also another nice twist.......