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    Module 2 - ARIMA PDF

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    Sruti Suhasaria
    1. The document discusses univariate time series forecasting techniques, specifically autoregressive (AR), moving average (MA), and autoregressive integrated moving average (ARIMA) models. 2. The Box-Jenkins procedure for identifying and estimating ARIMA models is presented, which involves identifying the model structure, estimating parameters, diagnostic checking, and forecasting. 3. Seasonal ARIMA models are also discussed to account for seasonality, with examples provided of possible SARIMA structures.

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    Module 2 - ARIMA PDF

    Uploaded by

    Sruti Suhasaria
    59 views15 pages
    1. The document discusses univariate time series forecasting techniques, specifically autoregressive (AR), moving average (MA), and autoregressive integrated moving average (ARIMA) models. 2. The Box-Jenkins procedure for identifying and estimating ARIMA models is presented, which involves identifying the model structure, estimating parameters, diagnostic checking, and forecasting. 3. Seasonal ARIMA models are also discussed to account for seasonality, with examples provided of possible SARIMA structures.

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    1. The document discusses univariate time series forecasting techniques, specifically autoregressive (AR), moving average (MA), and autoregressive integrated moving average (ARIMA) models. 2. The Box-Jenkins procedure for identifying and estimating ARIMA models is presented, which involves identifying the model structure, estimating parameters, diagnostic checking, and forecasting. 3. Seasonal ARIMA models are also discussed to account for seasonality, with examples provided of possible SARIMA structures.

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    © All Rights Reserved
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    59 views15 pages

    Module 2 - ARIMA PDF

    Uploaded by

    Sruti Suhasaria
    1. The document discusses univariate time series forecasting techniques, specifically autoregressive (AR), moving average (MA), and autoregressive integrated moving average (ARIMA) models. 2. The Box-Jenkins procedure for identifying and estimating ARIMA models is presented, which involves identifying the model structure, estimating parameters, diagnostic checking, and forecasting. 3. Seasonal ARIMA models are also discussed to account for seasonality, with examples provided of possible SARIMA structures.

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    of 15

    Module 2

    Univariate Time Series Models

    Muhammed Rafi OPC


    Assistant Professor
    BASE University
    Univariate forecasting technique
    Why Forecasting ?
    Autoregressive Integrated Moving Average
    (ARIMA) model

    Box & Jenkins - 1976

    Why univariate time-series?


    An appropriate economic theory to explain the
    relationship between series may not be available

    Data unavailability- use lagged dependent variable


    to forecast the future values 2
    Autoregressive Model
    yt depends only on its own past values yt 1, yt 2 , yt 3 ,...

    AR (1) yt  1 yt 1  ut where ut  wn(0,  2 )

    AR (2) yt  1 yt 1   2 yt 2  ut

    AR (p) yt  1 yt 1   2 yt 2  .............   p yt  p  ut
    p
    y t    i y t i  u t
    i 1
    3
    yt  1 yt 1  ut yt 1  1 yt  ut 1
    Moving Average Model
    yt depends only on past error terms ut 1, ut 2 , ut 3 ,...

    MA (1) yt  1ut 1  ut

    MA (2) yt  1ut 1   2ut 2  ut

    q
    MA (q) y t    i u t i  u t
    i 1
    Autoregressive Moving Average Model

    ARMA (1, 1) yt  1 yt 1  φ1ut 1  ut

    ARMA (2, 1) yt  1 yt 1   2 yt 2  φ1ut 1  ut

    ARMA (2, 2) yt  1 yt 1   2 yt 2  φ1ut 1  φ2ut 2  ut

    p q
    ARMA (p, q) y t    i y t i   φ j u t  j  u t
    i 1 j 1

    5
    Autoregressive Integrated Moving Average (ARIMA) Model

    Integrated Process and ARIMA Models


    yt
    • ARMA model can be fit for only if it is a stationary process.

    If y t is an integrated series of order (1) then ARIMA (1,


    1, 1) model can be defined as
    yt  1yt 1  φut 1  ut

    • Hence, ARIMA (p, d, q)


    p q
     y     y
    d d
      φ u u
    t i t i j t j t
    i 1 j 1
    6
    Box-Jenkins procedure
    Steps in ARIMA Model-building.
    Identify the
    Model

    Estimate
    Parameters

    Diagnostic bad Revise the Model


    Checking
    good

    Forecast
    7
    1. Identifying the structure of ARIMA
    ARIMA (p, d, q)
    p q
     y     y
    d d
      φ u u
    t i t i j t j t
    i 1 j 1
    • d?
    • p? Partial Autocorrelation Function (PACF)

    • q? Autocorrelation Function (ACF)

    8
    1. Identifying the structure of ARIMA
    Correlation coefficient
    T

     (Y t  Y )( X t  X )
     t  K 1
    T T

     (Y
    t 1
    t Y ) 2
    (X
    t 1
    t  X )2

    Autocorrelation coefficient
    T

     (Y t  Yt )(Yt  k  Yt  k )
     t  K 1
    T T

     (Y
    t 1
    t  Yt ) 2
     (Y
    t 1
    t k  Yt  k ) 2

    Cov (Yt , Yt  k )

    Var (Yt )Var (Yt  k )

    Cov (Yt , Yt  k )

    Var (Yt )
    9
    Direct effect
    Yt Yt-2
    Yt-1

    Indirect effect

    Partial autocorrelation coefficient


    Yt   0  1Yt 1   2Yt 2 .......   k Yt k   t

    Partial autocorrelation between yt and yt  k is  k

    10
    2. Estimate Parameters
    • AR terms
    • MA terms

    3. Diagnostic checking
    • Highest R-square
    • Highest Log likelihood
    • Lowest AIC/SC/HQC
    • Lowest RMSE

    4. Forecast

    11
    Seasonal ARIMA (SARIMA) model
    • seasonality
    ARIMA (p, d, q) (P, D, Q)m
    p = Autoregressive term (AR)

    q = Moving Average term (MA)


    d = differencing
    P = Seasonal Autoregressive term (SAR)
    Q = Seasonal Moving Average term (SMA)
    D = Seasonal differencing
    yt  yt 1 yt  yt m yt  yt 4 yt  yt 12
    m = The number of time steps for a single seasonal period.
    12
    ARIMA (p, d, q) (P, D, Q)m

    ARIMA (1, 0, 0) (1, 0, 0)4

    ARIMA (0, 0, 1) (0, 0, 1)4

    ARIMA (1, 0, 1) (2, 0, 1)4

    ARIMA (1, 0, 1) (1, 0, 2)12

    ARIMA (1, 0, 1) (1, 0, 2)7

    13
    Information Criteria
    Akaike Information
    Criterion

    T= No.of observations
    k= No.of parameters

    Schwarz bayesian
    criterion

    Hannan Quinn Information


    Criterion

    14
    Thank You

    15

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