Difference or not to difference an integrated time series? An empirical investigation
Journal Title: Economic Research-Ekonomska Istraživanja - Year 2018, Vol 31, Issue 1
Abstract
This paper uses the gross domestic product growth rates of Malaysia, Thailand, Indonesia and China in an empirical examination to determine whether an integrated time series should be differenced before it is used for forecasting. The results reveal that Mallows model combination (M.M.A.) of original and differenced series is a better choice than just differencing the series only if the perturbation instability measure is more than 1.25 for autoregressive (A.R.) model, and 1.105 for moving average (M.A.) model and autoregressive fractional integrated moving average (A.R.F.I.M.A.) model. Furthermore, it is found that M.M.A. performs better in forecasting with better model stability for the case of M.A. and A.R.F.I.M.A. than A.R. However, M.M.A. is very sensitive in financial crisis.
Authors and Affiliations
Chee-Yin Yip, Hock-Eam Lim, Hongbo Duan
Keywords
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- EP ID EP543403
- DOI 10.1080/1331677X.2018.1484783
- Views 48
- Downloads 0
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