Quick Review—333

Here’s our ARIMA-based forecast, together with the regres- sion-based forecast generated earlier. In the example at hand, the ARIMA based forecast gets a bit closer to the true data.

Quick Review

You can check for persistence in regression errors with a variety of visual aids as well as with formal statistical tests. Regressions are easily corrected for the presence of ARMA errors by the addition of AR(1), AR(2), etc., terms in the ls command.

ARMA and ARIMA models are easily estimated by using the ls command without including any exogenous variables on the right. Forecasting requires nothing more than pushing the button.

334—Chapter 13. Serial Correlation—Friend or Foe?