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I am using the Unobserved Components Model to decompose metal price data in Stata. i am using a model with three terms trend, cycle and irregular. I specif the model below:

ucm copper, model(strend) cycle(1, frequency(1.5)) cycle(2, frequency(2.5))

my first cycle is of order 1 and the second is of 2 (as shown in the stata manual) what does the order of the cycle mean? Can i specify both cycles to be of order 1?

Richard Hardy
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user68411
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1 Answers1

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Unobserved components model, is very flexible modeling tool that can incorporate multiple seasonal and cyclical components. Although I have not used stata personally, the order in cycle statement simply means the number of cycles in your model. In your case you have 2 cycles one with a frequency of 1.5 and the other with a frequency of 2.5

forecaster
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