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4 views21 pagesARMA Autocorrelation Functions

Jun 02, 2013

ARMA Autocorrelation Functions

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ARMA Autocorrelation Functions

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ARMA Autocorrelation Functions

ARMA Autocorrelation Functions

Attribution Non-Commercial (BY-NC)

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x

t

= w

t

+

1

w

t1

+

2

w

t2

+ +

q

w

tq

.

So (with

0

= 1)

(h) = cov

_

x

t+h

, x

t

_

= E

_

_

_

_

q

j=0

j

w

t+hj

_

_

_

_

q

k=0

k

w

tk

_

_

_

_

=

_

2

w

qh

j=0

j+h

, 0 h q

0 h > q.

1

So the ACF is

(h) =

_

_

qh

j=0

j+h

q

j=0

2

j

, 0 h q

0 h > q.

Notes:

In these expressions,

0

= 1 for convenience.

(q) = 0 but (h) = 0 for h > q. This characterizes

MA(q).

2

For an autoregressive process, AR(p):

x

t

=

1

x

t1

+

2

x

t2

+ +

p

x

tp

+w

t

.

So

(h) = cov

_

x

t+h

, x

t

_

= E

_

_

_

_

p

j=1

j

x

t+hj

+w

t+h

_

_

x

t

_

_

=

p

j=1

j

(h j) +cov

_

w

t+h

, x

t

_

.

3

Because x

t

is causal, x

t

is w

t

+ a linear combination of w

t1

, w

t2

, . . . .

So

cov

_

w

t+h

, x

t

_

=

_

_

_

2

w

h = 0

0 h > 0.

Hence

(h) =

p

j=1

j

(h j), h > 0

and

(0) =

p

j=1

j

(j) +

2

w

.

4

If we know the parameters

1

,

2

, . . . ,

p

and

2

w

, these equa-

tions for h = 0 and h = 1, 2, . . . , p form p +1 linear equations

in the p +1 unknowns (0), (1), . . . , (p).

The other autocovariances can then be found recursively

from the equation for h > p.

Alternatively, if we know (or have estimated) (0), (1), . . . , (p),

they form p + 1 linear equations in the p + 1 parameters

1

,

2

, . . . ,

p

and

2

w

.

These are the Yule-Walker equations.

5

For the ARMA(p, q) model with p > 0 and q > 0:

x

t

=

1

x

t1

+

2

x

t2

+ +

p

x

tp

+w

t

+

1

w

t1

+

2

w

t2

+ +

q

w

tq

,

a generalized set of Yule-Walker equations must be used.

The moving average models ARMA(0, q) = MA(q) are the

only ones with a closed form expression for (h).

For AR(p) and ARMA(p, q) with p > 0, the recursive equation

means that for h > max(p, q + 1), (h) is a sum of geomet-

rically decaying terms, possibly damped oscillations.

6

The recursive equation is

(h) =

p

j=1

j

(h j), h > q.

What kinds of sequences satisfy an equation like this?

Try (h) = z

h

for some constant z.

The equation becomes

0 = z

h

j=1

j

z

(hj)

= z

h

_

_

1

p

j=1

j

z

j

_

_

= z

h

(z).

7

So if (z) = 0, then (h) = z

h

satises the equation.

Since (z) is a polynomial of degree p, there are p solutions,

say z

1

, z

2

, . . . , z

p

.

So a more general solution is

(h) =

p

l=1

c

l

z

h

l

,

for any constants c

1

, c

2

, . . . , c

p

.

If z

1

, z

2

, . . . , z

p

are distinct, this is the most general solution;

if some roots are repeated, the general form is a little more

complicated.

8

If all z

1

, z

2

, . . . , z

p

are real, this is a sum of geometrically

decaying terms.

If any root is complex, its complex conjugate must also be a

root, and these two terms may be combined into geometri-

cally decaying sine-cosine terms.

The constants c

1

, c

2

, . . . , c

p

are determined by initial condi-

tions; in the ARMA case, these are the Yule-Walker equa-

tions.

Note that the various rates of decay are the zeros of (z),

the autoregressive operator, and do not depend on (z), the

moving average operator.

9

Example: ARMA(1, 1)

x

t

= x

t1

+w

t1

+w

t

.

The recursion is

(h) = (h 1), h = 2, 3, . . .

So (h) = c

h

for h = 1, 2, . . . , but c = 1.

Graphically, the ACF decays geometrically, but with a dier-

ent value at h = 0.

10

5 10 15 20 25

0

.

2

0

.

4

0

.

6

0

.

8

1

.

0

Index

A

R

M

A

a

c

f

(

a

r

=

0

.

9

,

m

a

=

0

.

5

,

2

4

)

11

The Partial Autocorrelation Function

An MA(q) can be identied from its ACF: non-zero to lag q,

and zero afterwards.

We need a similar tool for AR(p).

The partial autocorrelation function (PACF) lls that role.

12

Recall: for multivariate random variables X, Y, Z, the partial

correlations of X and Y given Z are the correlations of:

the residuals of X from its regression on Z; and

the residuals of Y from its regression on Z.

Here regression means conditional expectation, or best lin-

ear prediction, based on population distributions, not a sam-

ple calculation.

In a time series, the partial autocorrelations are dened as

h,h

= partial correlation of x

t+h

and x

t

given x

t+h1

, x

t+h2

, . . . , x

t+1

.

13

For an autoregressive process, AR(p):

x

t

=

1

x

t1

+

2

x

t2

+ +

p

x

tp

+w

t

,

If h > p, the regression of x

t+h

on x

t+h1

, x

t+h2

, . . . , x

t+1

is

1

x

t+h1

+

2

x

t+h2

+ +

p

x

t+hp

So the residual is just w

t+h

, which is uncorrelated with

x

t+h1

, x

t+h2

, . . . , x

t+1

and x

t

.

14

So the partial autocorrelation is zero for h > p:

h,h

= 0, h > p.

We can also show that

p,p

=

p

, which is non-zero by as-

sumption.

So

p,p

= 0 but

h,h

= 0 for h > p. This characterizes AR(p).

15

The Inverse Autocorrelation Function

SASs proc arima also shows the Inverse Autocorrelation Func-

tion (IACF).

The IACF of the ARMA(p, q) model

(B)x

t

= (B)w

t

is dened to be the ACF of the inverse (or dual) process

(B)x

(inverse)

t

= (B)w

t

.

The IACF has the same property as the PACF: AR(p) is

characterized by an IACF that is nonzero at lag p but zero

for larger lags.

16

Summary: Identication of ARMA processes

AR(p) is characterized by a PACF or IACF that is:

nonzero at lag p;

zero for lags larger than p.

MA(q) is characterized by an ACF that is:

nonzero at lag q;

zero for lags larger than q.

For anything else, try ARMA(p, q) with p > 0 and q > 0.

17

For p > 0 and q > 0:

AR(p) MA(q) ARMA(p, q)

ACF Tails o Cuts o after lag q Tails o

PACF Cuts o after lag p Tails o Tails o

IACF Cuts o after lag p Tails o Tails o

Note: these characteristics are used to guide the initial choice

of a model; estimation and model-checking will often lead to

a dierent model.

18

Other ARMA Identication Techniques

SASs proc arima oers the MINIC option on the identify

statement, which produces a table of SBC criteria for various

values of p and q.

The identify statement has two other options: ESACF and

SCAN.

Both produce tables in which the pattern of zero and non-

zero values characterize p and q.

See Section 3.4.10 in Brocklebank and Dickey.

19

options linesize = 80;

ods html file = varve3.html;

data varve;

infile ../data/varve.dat;

input varve;

lv = log(varve);

run;

proc arima data = varve;

title Use identify options to identify a good model;

identify var = lv(1) minic esacf scan;

estimate q = 1 method = ml;

estimate q = 2 method = ml;

estimate p = 1 q = 1 method = ml;

run;

proc arima output

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