Applied Data Mining for Forecasting Using SAS

Appendix A

1) Some background on denominator order polynomials. The simple relationship shown in equation 1 maps directly to the way a denominator polynomial order works. Consider the resemblance between equation 1 and the denominator order 1 polynomial shown in equation 2.

Where γ is the scale effect, and B is the backshift operator. Note, above ⇒ |δ| <1.

2) ARMA models as ratios of polynomials.

Consider the general ARMA (p, q) specification, below.

Rearranging,

Applying the Backshift operator, and rearranging some more;

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