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varying parameter model should give increased forecast performance

(Athans). Anderson and Moore (p. 52) state that the traditional

constant parameter formulation with Q = 0 may not be wise since

"there is the possibility that the smallest of modeling errors can

lead, in time, to overwhelming errors" which were not predictable

from the estimated error covariance.

 Within a multi-equation context the varying parameter structure -

may be introduced. Given this framework updating may take place

with regard to the structural parameters or the (initially) re-

stricted reduced form parameters. The results for predicting quarterly

Choice steer prices indicate that both methods gave improved fore-

casting accuracy over the naively updated constant parameter model,

but with no clear advantage for either updating scheme evidenced.