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ARIMA Drift Hyndman

The document discusses including constants in ARIMA models in R. It explains that R uses a parametrization where including a constant is equivalent to inducing a polynomial trend in the forecast function. It then covers how to specify including or excluding a constant using the arima(), Arima(), and auto.arima() functions in R. The constant has an important effect on the eventual forecast function depending on whether the model includes differencing or trends.

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hallerwang0402
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199 views2 pages

ARIMA Drift Hyndman

The document discusses including constants in ARIMA models in R. It explains that R uses a parametrization where including a constant is equivalent to inducing a polynomial trend in the forecast function. It then covers how to specify including or excluding a constant using the arima(), Arima(), and auto.arima() functions in R. The constant has an important effect on the eventual forecast function depending on whether the model includes differencing or trends.

Uploaded by

hallerwang0402
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Lähde: Rob Hyndman, http://www.r-bloggers.

com/constants-and-arima-models-in-r/ (jos aihe


kiinnostaa laajemmin, ks. OTexts.com/fpp/).

A non-seasonal ARIMA model can be written as

(1)

or equivalently as

(2)

where is the backshift operator, and is the mean of .


R uses the parametrization of equation (2).

Thus, the inclusion of a constant in a non-stationary ARIMA model is equivalent to inducing a


polynomial trend of order in the forecast function. (If the constant is omitted, the forecast
function includes a polynomial trend of order .) When , we have the special case
that is the mean of .

Including constants in ARIMA models using R

arima()

By default, the arima() command in R sets when and provides an estimate of


when . The parameter is called the “intercept” in the R output. It will be close to the
sample mean of the time series, but usually not identical to it as the sample mean is not the
maximum likelihood estimate when .

The arima() command has an argument include.mean which only has an effect when
and is TRUE by default. Setting include.mean=FALSE will force .

Arima()

The Arima() command from the forecast package provides more flexibility on the inclusion of a
constant. It has an argument include.mean which has identical functionality to the
corresponding argument for arima(). It also has an argument include.drift which allows
when . For , no constant is allowed as a quadratic or higher order trend is
particularly dangerous when forecasting. The parameter is called the “drift” in the R output
when .

There is also an argument include.constant which, if TRUE, will set include.mean=TRUE if


and include.drift=TRUE when . If include.constant=FALSE, both
include.mean and include.drift will be set to FALSE. If include.constant is used, the
values of include.mean=TRUE and include.drift=TRUE are ignored.
When and include.drift=TRUE, the fitted model from Arima() is

In this case, the R output will label as the “intercept” and as the “drift” coefficient.

auto.arima()

The auto.arima() function automates the inclusion of a constant. By default, for or


, a constant will be included if it improves the AIC value; for the constant is always
omitted. If allowdrift=FALSE is specified, then the constant is only allowed when .

Eventual forecast functions

The eventual forecast function (EFF) is the limit of as a function of the forecast horizon
as .

The constant has an important effect on the long-term forecasts obtained from these models.

 If and , the EFF will go to zero.


 If and , the EFF will go to a non-zero constant determined by the last few
observations.
 If and , the EFF will follow a straight line with intercept and slope
determined by the last few observations.
 If and , the EFF will go to the mean of the data.
 If and , the EFF will follow a straight line with slope equal to the mean of
the differenced data.
 If and , the EFF will follow a quadratic trend.

Seasonal ARIMA models

If a seasonal model is used, all of the above will hold with replaced by where is the
order of seasonal differencing and is the order of non-seasonal differencing.

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