In a previous article about Markov transition matrices, I mentioned that you can estimate a Markov transition matrix by using historical data that are collected over a certain length of time. A SAS programmer asked how you can estimate a transition matrix in SAS. The answer is that you can use PROC FREQ to tabulate the number of transitions from one state to another. The procedure outputs counts and row percentages, either of which can be used to construct an estimate of the transition matrix.

### Transition of families through economic classes

Let's start with some data.
A charity provides education, healthcare, and agricultural assistance to an impoverished town in Central America. The charity wants to estimate the transition of families through various economic categories (or *states*) based on the total family income:

- State 1 is used for the poorest families who earn less than $2 per day per person.
- State 2 is for families who earn between $2-$10 per day per person.
- State 3 is for families who earn between $10-$20 per day per person.
- State 4 is for families who earn more than $20 per day per person.

The charity has access to the economic status of 160 families who have been in the program for five years. The following SAS DATA step defines the beginning and ending states for these families:

/* State 1: families who earn less than $2 per day State 2: families who earn between $2-$10 per day State 3: families who earn between $10-$20 per day State 4: families who earn more than $20 per day */ data History; retain ID; input BeginState EndState @@; ID + 1; datalines; 1 2 2 2 1 3 3 3 3 3 3 3 1 1 3 2 4 4 3 3 4 4 1 1 3 2 1 1 1 3 3 3 2 2 2 2 2 2 3 2 2 3 1 3 1 1 1 2 4 3 1 1 3 4 1 3 3 3 1 2 1 2 3 3 1 3 3 4 2 2 1 2 3 2 1 2 1 1 3 2 1 3 1 1 1 1 1 1 1 3 1 3 3 3 1 1 2 2 4 4 1 1 2 3 1 1 1 2 2 2 2 2 1 3 2 2 1 1 1 2 3 3 1 3 4 4 1 3 3 4 1 1 1 2 2 2 1 2 3 2 1 1 3 3 3 3 1 2 1 1 1 2 3 3 2 2 1 3 3 2 1 1 1 2 1 1 4 2 1 2 1 3 1 2 1 1 2 1 1 1 2 3 1 2 2 2 1 1 3 4 1 1 1 1 2 2 3 3 4 3 3 2 4 3 1 1 2 1 2 3 2 2 1 2 4 4 1 2 2 1 2 1 2 2 1 1 2 3 4 4 1 2 1 1 2 2 1 2 4 2 1 1 2 2 1 1 1 2 1 1 2 1 2 1 1 2 2 3 2 2 3 3 4 3 1 1 2 2 1 1 2 1 1 1 2 2 1 1 1 1 1 1 2 2 1 1 3 2 1 3 3 2 3 3 4 4 1 1 4 2 3 3 4 4 3 2 4 4 2 2 1 3 3 3 4 4 4 3 1 2 ; proc print data=History(obs=10) noobs; run; |

The output from PROC PRINT shows the beginning and ending states for 10 families. The first family was in State 1 at the beginning of the program but was in State 2 at the end of the program. The second family was in State 2 at the beginning and remained there. The third family was in State 1 at the beginning of the program but was in State 3 at the end, and so forth. You can use PROC FREQ to tabulate the matrix of counts for the transitions from one category into another, as follows:

proc freq data=History ; tables BeginState * EndState / out=freqOut sparse nocol nopercent outpct; run; |

The output shows the counts and the row percentages for the data. The first row of the output is for the 75 families who started the program in State 1. Of those families, 37 (49%) remained in State 1 at the end of the program, 23 (31%) had progressed to State 2, and 15 (20%) had progressed to State 3. The second row of the output is for the 35 families who started the program in State 2. Of those families, 7 (20%) regressed to State 1, 22 (63%) remained in State 2, and 6 (17%) advanced to State 3. The other rows of the output are interpreted similarly.

You can use the row percentages to estimate the transition matrix. Merely divide each percentage by 100 to obtain a proportion. The proportion in the (*i,j*)th cell estimates the probability that a family that was in State *i* at the beginning of the program is in State *j* at the end of the program.

### Reading the probabilities into a transition matrix

Most SAS programmers use SAS IML software to work with Markov transition matrices. The output from PROC FREQ is in "long form" in a data set that has 16 rows. You can read the estimates into a SAS IML vector and then reshape them into a 4 x 4 matrix. You can create the matrix in two ways: you can read the raw counts into a matrix and then divide each row by the row sum, or you can read the row percentages directly and then divide by 100 to obtain probabilities.

proc iml; use freqOut; read all var {'BeginState' 'EndState' 'Count' 'Pct_Row'}; /* read the states, counts, and row percentages */ close; N = sqrt(nrow(Count)); /* this should be an integer or else something is wrong */ names = EndState[1:N]; /* there should be N unique states */ /* estimate transition matrix by using counts of transitions */ C = shape(Count, N, N); /* matrix of raw counts for each transition */ M = C / C[,+]; /* divide each cell by total counts for the row */ print M[r=names c=names]; /* or read the PCT_ROW column directly */ M = shape(Pct_Row, N, N); /* raw counts */ M = M / 100; /* convert from percentages to proportions */ print M[r=names c=names]; |

The matrix of counts shows that 23+15+6+4 = 48 out of 160 families improved their states during the program. Only 7+11+3+5 = 26 families ended the program in a worse state than they began.

The estimates for the transition probability matrix are the same for both calculations, so only one output is shown. For the poorest families (the first row), about 50% did not improve their economic state whereas the other 50% did. For the families that began in State 2, 20% slipped back into extreme poverty (unfortunately), 63% stayed in that state, and 17% increased their state. The remaining rows have similar interpretations.

### Summary

This article shows how to use PROC FREQ in SAS to construct an estimate of a Markov transition matrix from historical data. For each subject in the study, you need to know the state of the subject at the beginning and at the end of a time period. You can then construct a matrix of counts for the transition of subjects between states. By dividing each row by its row sum, you obtain empirical probability estimates.

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