6. Forecasting

  1. Ngai Hang Chan

Published Online: 28 JAN 2011

DOI: 10.1002/9781118032466.ch6

Time Series: Applications to Finance with R and S-Plus, Second Edition

Time Series: Applications to Finance with R and S-Plus, Second Edition

How to Cite

Chan, N. H. (2010) Forecasting, in Time Series: Applications to Finance with R and S-Plus, Second Edition, John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118032466.ch6

Author Information

  1. The Chinese University of Hong Kong, Department of Statistics, Shatin, Hong Kong

Publication History

  1. Published Online: 28 JAN 2011
  2. Published Print: 13 SEP 2010

ISBN Information

Print ISBN: 9780470583623

Online ISBN: 9781118032466

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Keywords:

  • ARIMA model;
  • Box and Jenkins approach;
  • forecasting;
  • time series;
  • treasury bill

Summary

Having observed a time series {Y1,…, Yn}, the authors in this chapter are interested in forecasting a future value Yn+h. The chapter discusses the different ways to perform forecasts. Simple forecast and Box and Jenkins approach are used to perform forecast . The chapter begins by introducing three important quantities. The first is the forecast function Yn(h). The second quantity is the corresponding forecast error, while the third is the variance of this error. Box and Jenkins approach procedure amounts to fitting an ARIMA model and using it for forecasting purposes. The chapter presents the treasury bill example, which considers the series that consists of the monthly interest rate on three-month government Treasury bills from the beginning of 1950 through June 1988. It also mentions two commonly used algorithms for calculating the prediction of Yn+1.

Controlled Vocabulary Terms

ARIMA process; Box-Jenkins model; forecasting