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Thread: help with ACF and PACF

  1. #1
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    help with ACF and PACF

    Hi Guys,

    Can some one help with interpreting the ACF and PACF graph, I have run a multiple regression and suspect the errors are autoregressive. I have ploted the ACF and PACF graphs for the residuals.Can someone tell me the AR and MA order?

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  2. #2
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    Re: help with ACF and PACF

    The general shape of the bars in the ACF-plot is exponentially decaying to zero (which indicates an AR structure) rather than one or more spikes (which would indicate a MA process). I thus think this is an AR process. To estmate the order, it is sufficient to concentrate on the pACF-plot, since this plot shows the "puriefied" correlations. What I mean is, in the ACF-plot you observe the effect that an observation at time t correlates with the observation at time t-2 only because it correlates with t-1 (which again correlates with t-2), and this "indirect" effect is partialled out in the pACF-plot. The pACF-plot indicates an AR structure of 2-6, I think an AR(2) structure is probably enough, since the first two bars strongly exceed the confidence bands.

  3. The Following 2 Users Say Thank You to mmercker For This Useful Post:

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