Hi Peta,
The VGXVARX function cannot adapt model parameters, but the idea you proposed can be implemented. VAR models are typically estimated by equation-wise least squares, which can be performed iteratively instead of using all observations at once.
If you do not want to write your own codes for recursive least squares, or using some third-party MATLAB codes, you may consider the state-space model supported by the Econometrics Toolbox. Put the VAR coefficients as the state variables (static transition, of course) and use each observation to update the state distribution whenever a new observation arrives. This will yield the recursive least squares results.
- Hang Qian
