Recursive least squares is an expanding window version of ordinary least squares. In addition to availability of regression coefficients computed recursively, the recursively computed residuals the construction of statistics to investigate parameter instability.
The RecursiveLS class allows computation of recursive residuals and computes CUSUM and CUSUM of squares statistics. Plotting these statistics along with reference lines denoting statistically significant deviations from the null hypothesis of stable parameters allows an easy visual indication of parameter stability.
Finally, the RecursiveLS model allows imposing linear restrictions on the parameter vectors, and can be constructed using the formula interface.
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