Prof.

Rozenn Dahyot

www.scss.tcd.ie/Rozenn.Dahyot

TCD 2016

Lab 5

Prediction intervals with AR(1)

Learning Outcomes

Fitting an AR(1) model with !

Forecasts and prediction intervals with AR(1)

1. you can fit an AR(1) to the time series *:

!*!!
Using the help file, explain this command line.
2. Modify this command line to fit an MA(1) to the time series *.
3. Visualise the forecasts and prediction intervals (1000 steps ahead)

5!*5!*!!
4. In the lecturenotes we have shown that the prediction interval at time n + 2 was:
q
yn+2 2s 21 + 1
and it can be shown that for time n + 3, it is (check it out yourself):
q
yn+3 2s 41 + 21 + 1

and it can be shown (by induction) that for time n + k, it is (check it out yourself):
q
yn+k 2s 12(k1) + 41 + 21 + 1

Explain why (hint: look up geometric series in wikipedia for instance)

s
q
1
2(k1)
4
2
lim 1
+ 1 + 1 + 1 =
k
1 21

In light of this mathematical result, explain the form of the prediction intervals in the case:

5!*5!*!!