What is the difference between AR lags and MA error lags?

Conditions

• Forecasting a time series
• Uses past values of the same series for AR
• Uses past errors for MA

Reasoning, step by step

1. Identify the definition of AR models.
2. Identify the definition of MA models.
3. Contrast the inputs: past observations vs. past errors.

Example

The slide text reads: 'AR – forecast a series based solely on the past values in the series – called lags.' and 'MA – forecast a series based solely on the past errors in the series – called error lags.'

Common misconceptions

• Thinking AR and MA models use the same type of past information.
• Confusing observed values with error terms.

Watch the explanation

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