Experience with using the Box-Cox transformation when forecasting economic time series |
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Authors: | Harold L Nelson CWJ Granger |
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Institution: | University of California at San Diego, La Jolla, CA 92093, USA |
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Abstract: | Experience using twenty-one actual economic series suggests that using the Box-Cox transform does not consistently produce superior forecasts. The procedure used was to consider transformations , where λ is chosen by maximum likelihood, a linear ARIMA model fitted to x(λ) and forecasts produced, and finally forecasts constructed for the original series. A main problem found was that no value of λ appeared to produce normally distributed data and so the maximum likelihood procedure was inappropriate. |
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