The effect of temporal aggregation on the estimation accuracy of ARMA models |
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Authors: | Paulo Teles Paulo S A Sousa |
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Institution: | 1. School of Economics, Porto University, Portugal;2. LIAAD-INESC Porto LA, Porto University, Portugalpteles@fep.up.pt |
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Abstract: | ABSTRACTAutoregressive Moving Average (ARMA) time series model fitting is a procedure often based on aggregate data, where parameter estimation plays a key role. Therefore, we analyze the effect of temporal aggregation on the accuracy of parameter estimation of mixed ARMA and MA models. We derive the expressions required to compute the parameter values of the aggregate models as functions of the basic model parameters in order to compare their estimation accuracy. To this end, a simulation experiment shows that aggregation causes a severe accuracy loss that increases with the order of aggregation, leading to poor accuracy. |
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Keywords: | Aggregate time series ARMA models Estimation accuracy loss Mean absolute error MA models Mean absolute percentage error Parameter values Temporal aggregation |
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