How do you decide how many AR and MA terms to include in an ARMA model?

Conditions

• Used when deciding how many AR and MA terms to include

Reasoning, step by step

1. Identify the first technique: Plotting patterns in correlation.
2. Identify the second technique: Automatic selection techniques.

Example

The final slide lists 'Plotting patterns in correlation' and 'Automatic selection techniques' under 'Couple of different techniques to selecting models'.

Common misconceptions

• Thinking there is only one way to select model orders.
• Believing that automatic selection techniques provide final optimal models without refinement.

Watch the explanation

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