4.4 Forecasting

  • One of the main practical uses of time series models is for forecasting future observations
  • The existence of time dependence in a covariance stationary time series means that we can exploit this time dependence to obtain forecasts of future observations that are superior to the unconditional mean.
  • Describe basic forecasting problem
  • Show result that conditional mean is optimal mse forecast
  • Show chain-rule of forecasting for AR(1) processes