Final_1.pdf

(Tuis.) #1

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
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