ECON 483: Forecasting

This web page contains mathematical formulas and is therefore best viewed with Internet Explorer, because other web browsers may not correctly display the "Symbol" fonts involved.

Empirical homework assignment 6

The data for the homework assignment is available in EasyReg (former) default format (*) and in Excel CSV format (**). You may treat the time series involved as an annual time series, starting from year 1. This time series is generated as a stationary ARMA(p,q) process:

where the errors U_t are independent standard normally distributed, and

1. Determine the actual values of p an q.
2. Estimate the model for these values, and determine whether some coefficients are zero.
3. Re-estimate the (cleaned-up) model for observations 1 to 490, and forecast the observations 491 to 500, one step ahead as well as recursively.
4. Discuss the quality of the forecasts.

(*) Click on the link, and save the file as a text file on your hard disk via the "Save as .." option of your web browser. Note that Internet Explorer will try to save the file as a web page (*.htm format). You have to overrule that.

(**) If you use Internet Explorer and you click on the link the file will be automatically imported in Excel, provided that you have installed Excel. Then use the "Save as .." option of Excel to save the file on your hard disk. Netscape and Mozilla Firefox will display the file as a text file. Therefore, if you use Netscape or Firefox follow the procedure under (*).