Optimal Calculation of Residuals for ARMAX Models with Applications to Model Verification

Publikation: Working paper/PreprintWorking paperForskning

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Residual tests for sufficient model orders are based on the assumption that prediction errors are white when the model is correct. If an ARMAX system has zeros in the MA part which are close to the unit circle, then the standard predictor can have large transients. Even when the correct model is used there will be large correlations in the transient phase. In this case the standard residual tests are therefore not suitable. A new method based on backforecasting is therefore developed. Simulation and analysis shows that the new method gives the right answer where the standard method is misleading.
StatusUdgivet - 1997