model and the y-axis is the AIC value. Note that the AIC value registers a
minimum at four parameters. This is three AR parameters and a constant
value for the mean of the series. Using more parameters will result in a bet-
ter goodness of fit but will not help in forecasting. In some instances, it might
actually hurt the forecasting results.
Time Series 29
FIGURE 2.5B AIC Plot.
0
AIC Value
80.00
2 4 6
Number of Parameters
8 10
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00