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Time Series Methods-ARIMA

Time series analysis is a statistical technique that examines data points collected or recorded at specific time intervals. It categorizes data into time series, cross-sectional, and pooled data, and involves concepts such as dependence, stationarity, and differencing. The ARIMA model, which stands for Auto Regressive Integrated Moving Average, is a key method used for analyzing and forecasting time series data by specifying parameters for autoregression, integration, and moving averages.

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8 views2 pages

Time Series Methods-ARIMA

Time series analysis is a statistical technique that examines data points collected or recorded at specific time intervals. It categorizes data into time series, cross-sectional, and pooled data, and involves concepts such as dependence, stationarity, and differencing. The ARIMA model, which stands for Auto Regressive Integrated Moving Average, is a key method used for analyzing and forecasting time series data by specifying parameters for autoregression, integration, and moving averages.

Uploaded by

PRIYANKA REBBA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Time Series Analysis

Time series analysis is a statistical technique that deals with time series data, or trend
analysis. Time series data means that data is in a series of particular time periods or
intervals.

The data is considered in three types:

Time series data: A set of observations on the values that a variable takes at different
times.

Cross-sectional data: Data of one or more variables, collected at the same point in time.

Pooled data: A combination of time series data and cross-sectional data.

Terms and concepts:

Dependence: Dependence refers to the association of two observations with the same
variable, at prior time points.
Stationarity: Shows the mean value of the series that remains constant over a time
period; if past effects accumulate and the values increase toward infinity, then stationarity
is not met.
Differencing: Used to make the series stationary, to De-trend, and to control the auto-
correlations; however, some time series analyses do not require differencing and over-
differenced series can produce inaccurate estimates.
Specification: May involve the testing of the linear or non-linear relationships of
dependent variables by using models such as ARIMA, ARCH, GARCH, VAR, Co-
integration, etc.
Exponential smoothing in time series analysis: This method predicts the one next
period value based on the past and current value. It involves averaging of data such that
the nonsystematic components of each individual case or observation cancel out each
other. The exponential smoothing method is used to predict the short term predication.
Alpha, Gamma, Phi, and Delta are the parameters that estimate the effect of the time
series data. Alpha is used when seasonality is not present in data. Gamma is used when
a series has a trend in data. Delta is used when seasonality cycles are present in data. A
model is applied according to the pattern of the data.

Curve fitting in time series analysis: Curve fitting regression is used when data is in a
non-linear relationship. The following equation shows the non-linear behavior:

Dependent variable, where case is the sequential case number.

Curve fitting can be performed by selecting “regression” from the analysis menu and then
selecting “curve estimation” from the regression option. Then select “wanted curve
linear,” “power,” “quadratic,” “cubic,” “inverse,” “logistic,” “exponential,” or “other.”

Dr.G.Naga Satish
ARIMA:

ARIMA is an acronym that stands for Auto Regressive Integrated Moving Average. It is
a class of model that captures a suite of different standard temporal structures in time
series data.

An ARIMA model is a class of statistical models for analyzing and forecasting time
series data.

This acronym is descriptive, capturing the key aspects of the model itself. Briefly, they
are:

 AR: Autoregression. A model that uses the dependent relationship between an


observation and some number of lagged observations.
 I: Integrated. The use of differencing of raw observations (e.g. subtracting an observation
from an observation at the previous time step) in order to make the time series stationary.
 MA: Moving Average. A model that uses the dependency between an observation and a
residual error from a moving average model applied to lagged observations.

Each of these components are explicitly specified in the model as a parameter. A standard
notation is used of ARIMA(p,d,q) where the parameters are substituted with integer
values to quickly indicate the specific ARIMA model being used.

The parameters of the ARIMA model are defined as follows:

 p: The number of lag observations included in the model, also called the lag order.
 d: The number of times that the raw observations are differenced, also called the degree
of differencing.
 q: The size of the moving average window, also called the order of moving average.

A linear regression model is constructed including the specified number and type of
terms, and the data is prepared by a degree of differencing in order to make it stationary,
i.e. to remove trend and seasonal structures that negatively affect the regression model.

A value of 0 can be used for a parameter, which indicates to not use that element of the
model. This way, the ARIMA model can be configured to perform the function of an
ARMA model, and even a simple AR, I, or MA model.

Dr.G.Naga Satish

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