AUTOREGRESSION ANALYSIS Meaning and
Definition
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Autoregression analysis, also known as autoregressive analysis, is a statistical method used to model and analyze time series data. It is a tool commonly used in econometrics, finance, and other fields where data is collected and recorded over regular intervals.
In autoregression analysis, the values of a variable of interest are regressed on their own past values. By examining the relationship between an observation and a specified number of previous observations, autoregression analysis helps identify patterns, trends, and potential forecasting models within the time series data.
The autoregressive model assumes that the present output of a system in a time series is influenced by its own previous outputs, rather than being influenced by external factors or other variables. This modeling technique is based on the idea that past values of a variable play a crucial role in predicting future values. The results of an autoregressive analysis can be used to generate forecasts or make predictions about future behavior based on the historical patterns observed in the data.
The autoregressive process is represented by the abbreviation AR, followed by a number denoting the order of the autoregressive model. For example, AR(1) refers to a first-order autoregressive model, while AR(2) represents a second-order autoregressive model. The number in brackets determines the number of past observations considered for analysis.
In summary, autoregression analysis is a statistical technique that examines the relationship between a current observation and its own previous values in a time series. By identifying patterns and modeling the data's autocorrelation structure, autoregression analysis can provide valuable insights, predictions, and forecasts related to the behavior of the variable of interest.
Etymology of AUTOREGRESSION ANALYSIS
The term "autoregression analysis" can be broken down into two parts: "autoregression" and "analysis".
1. Autoregression:
- "Auto" comes from the Greek word "autos", meaning self.
- "Regression" comes from the Latin word "regressus", which means a retreat or going back.
- In statistics, autoregression refers to a modeling technique where a variable is regressed on itself, using its own lagged values as predictors. It essentially examines the relationship between an observation and a number of lagged observations of the same variable.
2. Analysis:
- "Analysis" comes from the Greek word "analusis", meaning a breaking up or dissolution.
- In this context, analysis refers to the process of critically examining and studying the data to understand patterns, relationships, and generate insights using statistical methods and techniques.
