Hi,
I am trying to understand exactly what xreg does in arima. The documentation
for xreg says:"xreg Optionally, a vector or matrix of external regressors,
which must have the same number of rows as x." What does this mean with
regard to the action of xreg in arima?
Apparently somehow xreg made the following two arima fit equivalent in R:
arima(x, order=c(1,1,1), xreg=1:length(x))
is the same as
arima(diff(x), order=c(1,0,1))
While I understand the latter fit (I think), I am puzzled with regard to the
former. Does anyone know what the former is doing to arima, and why it works
as it does?
Thanks!
--
Tom
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