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    C 18,21,38,39,51business Forecasting

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    Prince Joshi
    ARIMA is a forecasting method that uses historical time series data to predict future values. It works best with at least 40 data points that exhibit a stable pattern over time. ARIMA is generally superior to exponential smoothing for longer, more correlated data. The method differs data as needed to make the time series stationary, then uses autoregressive and moving average parameters to model relationships between past values and errors. Forecasts are generated by estimating these parameters from autocorrelations in the historical data.

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    C 18,21,38,39,51business Forecasting

    Uploaded by

    Prince Joshi
    21 views8 pages
    ARIMA is a forecasting method that uses historical time series data to predict future values. It works best with at least 40 data points that exhibit a stable pattern over time. ARIMA is generally superior to exponential smoothing for longer, more correlated data. The method differs data as needed to make the time series stationary, then uses autoregressive and moving average parameters to model relationships between past values and errors. Forecasts are generated by estimating these parameters from autocorrelations in the historical data.

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    C 18,21,38,39,51Business Forecasting

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    ARIMA is a forecasting method that uses historical time series data to predict future values. It works best with at least 40 data points that exhibit a stable pattern over time. ARIMA is generally superior to exponential smoothing for longer, more correlated data. The method differs data as needed to make the time series stationary, then uses autoregressive and moving average parameters to model relationships between past values and errors. Forecasts are generated by estimating these parameters from autocorrelations in the historical data.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    21 views8 pages

    C 18,21,38,39,51business Forecasting

    Uploaded by

    Prince Joshi
    ARIMA is a forecasting method that uses historical time series data to predict future values. It works best with at least 40 data points that exhibit a stable pattern over time. ARIMA is generally superior to exponential smoothing for longer, more correlated data. The method differs data as needed to make the time series stationary, then uses autoregressive and moving average parameters to model relationships between past values and errors. Forecasts are generated by estimating these parameters from autocorrelations in the historical data.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 8

    Business Forecasting

    Presented by:
    Dhiraj Singh : C- 18
    Govind Sharma: C- 21
    Sagar Gupta: C- 38
    Sandeep Kumar: C- 39
    Tawfeeq Khan: C- 51
    ARIMA - Overview
    ● ARIMA is an acronym that stands for AutoRegressive Integrated
    Moving Average. It is a generalization of the simpler
    AutoRegressive Moving Average and adds the notion of integration.
    Its main application is in the area of short term forecasting requiring
    at least 40 historical data points. It works best when your data
    exhibits a stable or consistent pattern over time with a minimum
    amount of outliers
    ARIMA is usually superior to exponential smoothing techniques
    when the data is reasonably long and the correlation between past
    observations is stable
    If the data is short or highly volatile, then some smoothing method
    may perform better.
    Major Assumptions
    Stationarity ( AR Model) : A series is said to be stationarity if it is :
    ● "Stationarity" implies that the series remains at a fairly constant level over time.
    ● Has a finite and time-invariant variance
    ● If a trend exists, as in most economic or business applications, then your data is NOT stationary.
    ● The data should also show a constant variance in its fluctuations over time.

    Each component functions as a parameter with a standard notation. For ARIMA models, a standard notation
    would be ARIMA with p, d, and q, where integer values substitute for the parameters to indicate the type of
    ARIMA model used. The parameters can be defined as:
    ● p: the number of lag observations in the model; also known as the lag order.
    ● d: the number of times that the raw observations are differenced; also known as the degree of differencing.
    ● q: the size of the moving average window; also known as the order of the moving average
    Differencing
    ● If a graphical plot of the data indicates nonstationarity, then you should "difference" the
    series. Differencing is an excellent way of transforming a nonstationary series to a
    stationary one.
    This is done by subtracting the observation in the current period from the previous one. If
    this transformation is done only once to a series, you say that the data has been "first
    differenced".
    This process essentially eliminates the trend if your series is growing at a fairly constant
    rate. If it is growing at an increasing rate, you can apply the same procedure and difference
    the data again. Your data would then be "second differenced"
    Autocorrelations:
    ● Autocorrelations" are numerical values that indicate how a data series is related to itself over time.
    More precisely, it measures how strongly data values at a specified number of periods apart are
    correlated to each other over time.
    The number of periods apart is usually called the "lag". For example, an autocorrelation at lag 1
    measures how values 1 period apart are correlated to one another throughout the series.
    An autocorrelation at lag 2 measures how the data two periods apart are correlated throughout the
    series. Autocorrelations may range from +1 to -1. A value close to +1 indicates a high positive
    correlation while a value close to -1 implies a high negative correlation.
    These measures are most often evaluated through graphical plots called "correlograms". A correlogram
    plots the autocorrelation values for a given series at different lags. This is referred to as the
    "autocorrelation function" and is very important in the ARIMA method.
    Autoregressive Models
    ARIMA methodology attempts to describe the
    movements in a stationary time series as a
    function of what are called "autoregressive and ARIMA EQUATION
    moving average" parameters. These are referred
    to as AR parameters (autoregressive) and MA ARIMA(P,D,Q)
    parameters (moving averages). An AR model P- order of autoregression
    D- degree of differencing
    with only 1 parameter may be written as…
    Q- moving average order
    X(t) = A(1) * X(t-1) + E(t) ARIMA(1,0,0) -
    where X(t) = time series under investigation Y(t)= a(t)y(t-1)+e(t)
    A(1) = the autoregressive parameter of order 1 ARIMA(2,0,0)
    X(t-1) = the time series lagged 1 period Y(t)= a(t)y(t-1)+a(2)y(t-2)+e(t)
    E(t) = the error term of the model
    Thank you

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