Elaborate the need for the emergence of Time Series Analysis Box-Jenkins (1976)
ID: 3064188 • Letter: E
Question
Elaborate the need for the emergence of Time Series Analysis Box-Jenkins (1976) which ARIMA model was introduced?
Mathematical Notation
Meaning
If this assumption violated,
what will happen
Impact to model or assumption of CLRM
What kind of diagnostic test to use
Remedies
1
2
E(e)=0
The expected value of residuals is zero
3
e~N(0,1)
4
COV(ei,Xi)=0
The residuals and independent variable is not correlated
Endogeneity
The direction of X to Y and Y to X can happen simualtaneously
5
6
7
Mathematical Notation
Meaning
If this assumption violated,
what will happen
Impact to model or assumption of CLRM
What kind of diagnostic test to use
Remedies
1
2
E(e)=0
The expected value of residuals is zero
3
e~N(0,1)
4
COV(ei,Xi)=0
The residuals and independent variable is not correlated
Endogeneity
The direction of X to Y and Y to X can happen simualtaneously
5
6
7
Explanation / Answer
There are many advantages of Time series Analysis Box over classical linear regression models.Some of these are:-
1. they be used to explicitly decompose a time series in, for research, trend or seasonal effect
2.able to handle the dependencies in time series observations due to high flexibility.
3. they work transparently with missing data and are easily generalised to the multivariate analysis of time series.
when ARIMA model for a time series has been validated, it can produce forecasts for different periods. The observation of the past of the series enables to predict, the future values of the time series.
The Box-Jenkins procedure involves identifying an appropriateARIMA model, fitting it to the data and checking and diagnostic of the model.
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