R help - May 2009 - Help with kalman-filterd betas using the dlm package

Hi all R gurus out there, 
Im a kind of newbie to kalman-filters after some research I have found that
the dlm package is the easiest to start with. So be patient if some of my
questions are too basic.

I would like to set up a beta estimation between an asset and a market index
using a kalman-filter. Much littarture says it gives superior estimates
compared to OLS estimates. So I would like to learn and to use the filter.

I would like to run two types of kalman-filters, one with using a
random-walk model (RW) and one with a stationary model, in other worlds the
transition equition either follow a RW or AR(1) model.

This is how I think it would be set up;

I will have my time-series Y,X, where Y is the response variable

this setup should give me a RW process if I have understood the example
correctly
mydlmModel = dlmModReg(X)  + dlmModPoly(order=1)

and then run on the dlm model
dlmFilter(Y,mydlmModel )

but setting up a AR(1) process is unclear, should I use dlmModPoly or the
dlmModARMA to set up the model.

And at last but not the least, how do I set up a proper build function to
use with dlmMLE to optimize the starting values.

Regards Tom
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Have you worked through "vignette('dlm')"?  Vignettes are nice
because they provide an Adobe Acrobat Portable Document Format (pdf) 
file with a companion R script file, which you can get as follows: 


(dlm. <- vignette('dlm'))
Stangle(dlm.$file) 


      The first of these two lines opens the "pdf" file.  The second 
creates a file "dlm.R" in the working directory (getwd()) containing
the
R commands discussed in the "pdf" file. 


      If I remember correctly, your question is answered in this vignette. 


      You may also be interested in a book that is soon to appear about 
this package:  Petris, Petrone, and Campagnoli (2009) Dynamic Linear 
Models with R (Springer;  
http://www.amazon.com/Dynamic-Linear-Models-R-Use/dp/0387772375/ref=sr_1_4?ie=UTF8&s=books&qid=1242162708&sr=1-4),
scheduled to ship in late June.  If you have long-term interest in this 
subject, as I suspect you may, you might find this book interesting and 
useful. 


      Hope this helps.
      Spencer Graves

tom81 wrote:
> Hi all R gurus out there, 
> Im a kind of newbie to kalman-filters after some research I have found that
> the dlm package is the easiest to start with. So be patient if some of my
> questions are too basic.
>
> I would like to set up a beta estimation between an asset and a market
index
> using a kalman-filter. Much littarture says it gives superior estimates
> compared to OLS estimates. So I would like to learn and to use the filter.
>
> I would like to run two types of kalman-filters, one with using a
> random-walk model (RW) and one with a stationary model, in other worlds the
> transition equition either follow a RW or AR(1) model.
>
> This is how I think it would be set up;
>
> I will have my time-series Y,X, where Y is the response variable
>
> this setup should give me a RW process if I have understood the example
> correctly
> mydlmModel = dlmModReg(X)  + dlmModPoly(order=1)
>
> and then run on the dlm model
> dlmFilter(Y,mydlmModel )
>
> but setting up a AR(1) process is unclear, should I use dlmModPoly or the
> dlmModARMA to set up the model.
>
> And at last but not the least, how do I set up a proper build function to
> use with dlmMLE to optimize the starting values.
>
> Regards Tom
>