Decay Process of AR1 Forecasts
Posted: Fri May 14, 2010 2:28 pm
Hello,
I need to generate 12-step ahead out of sample forecasts for a basic AR(1) model
By construction the forecasts generated from an AR(1) process have to display a decaying property. However, I do not seem to be getting this result. Instead my forecast series is upward sloping and then sort of levels off
I am using least squares to estimate the equation from 1986-2000
Then I am using the command "EQ01.forecast" for a forecast sample of 2001-2010
Can somebody tell me what I might be doing wrong?
Thanks
I need to generate 12-step ahead out of sample forecasts for a basic AR(1) model
By construction the forecasts generated from an AR(1) process have to display a decaying property. However, I do not seem to be getting this result. Instead my forecast series is upward sloping and then sort of levels off
I am using least squares to estimate the equation from 1986-2000
Then I am using the command "EQ01.forecast" for a forecast sample of 2001-2010
Can somebody tell me what I might be doing wrong?
Thanks