the attached requirement and provide me a 1.5 pages of discussion answering all of
the questions in detail.Label the
introduction and each question and answer to that particular question. Also, make sure you cite any references and provide me internet reference links if you use any for the discussion.
Week 07 Discussion – ARIMA Models:
Read the below requirement and provide me a 1.5 pages of discussion answering all of the questions in detail. Label the introduction and each question and answer to that particular question.
ARIMA modeling is arguably the most sophisticated and complex of forecasting methods. Although it is a statistical model (like regression) in that we want to include in the model only those terms that are signficant, it is not as easily understood as regression in that we don’t exploit a relationship between the forecast variable and “other” independent variables. Instead we develop a model that uses past observations of Y (the autoregressive part) and past errors (the moving average part….BTW, moving average here has nothing to do with the moving average models we studied earlier in the course) to forecast future values of Y. An added level of complexity is that these autoregressive-moving average models can only be fitted to data that are stationary in the mean and variance, requiring us to use differencing and/or various data transformations. In this course we are just going to “scratch the surface” of ARIMA modeling and cover only nonseasonal ARIMA models (although ARIMA models can accomodate seasonallity).
In this week’s discussion forum I would like for you to describe the role of judgement in this most complex class of forecasting methods. Structure your comments around the Box Jenkins approach. What steps in the Box Jenkins approach require judgement? Be specific. Do you think the model builder/forecaster using ARIMA requires more expertise than if she/he were using the other forecasting methods covered in this course? Explain.