
## Generalized Least Squares

from __future__ import print_function
import statsmodels.api as sm
import numpy as np
from statsmodels.iolib.table import (SimpleTable, default_txt_fmt)


# The Longley dataset is a time series dataset: 

data = sm.datasets.longley.load()
data.exog = sm.add_constant(data.exog)
print(data.exog[:5])


# 
#  Let's assume that the data is heteroskedastic and that we know
#  the nature of the heteroskedasticity.  We can then define
#  `sigma` and use it to give us a GLS model
# 
#  First we will obtain the residuals from an OLS fit

ols_resid = sm.OLS(data.endog, data.exog).fit().resid


# Assume that the error terms follow an AR(1) process with a trend:
# 
# $\epsilon_i = \beta_0 + \rho\epsilon_{i-1} + \eta_i$
# 
# where $\eta \sim N(0,\Sigma^2)$
#  
# and that $\rho$ is simply the correlation of the residual a consistent estimator for rho is to regress the residuals on the lagged residuals

resid_fit = sm.OLS(ols_resid[1:], sm.add_constant(ols_resid[:-1])).fit()
print(resid_fit.tvalues[1])
print(resid_fit.pvalues[1])


#  While we don't have strong evidence that the errors follow an AR(1)
#  process we continue

rho = resid_fit.params[1]


# As we know, an AR(1) process means that near-neighbors have a stronger
#  relation so we can give this structure by using a toeplitz matrix

from scipy.linalg import toeplitz

toeplitz(range(5))


order = toeplitz(range(len(ols_resid)))


# so that our error covariance structure is actually rho**order
#  which defines an autocorrelation structure

sigma = rho**order
gls_model = sm.GLS(data.endog, data.exog, sigma=sigma)
gls_results = gls_model.fit()


# Of course, the exact rho in this instance is not known so it it might make more sense to use feasible gls, which currently only has experimental support. 
# 
# We can use the GLSAR model with one lag, to get to a similar result:

glsar_model = sm.GLSAR(data.endog, data.exog, 1)
glsar_results = glsar_model.iterative_fit(1)
print(glsar_results.summary())


# Comparing gls and glsar results, we see that there are some small
#  differences in the parameter estimates and the resulting standard
#  errors of the parameter estimate. This might be do to the numerical
#  differences in the algorithm, e.g. the treatment of initial conditions,
#  because of the small number of observations in the longley dataset.

print(gls_results.params)
print(glsar_results.params)
print(gls_results.bse)
print(glsar_results.bse)
