Forecasts of power‐transformed series
- 1 January 1987
- journal article
- research article
- Published by Wiley in Journal of Forecasting
- Vol. 6 (4) , 239-248
- https://doi.org/10.1002/for.3980060403
Abstract
Consider a time series transformed by an instantaneous power function of the Box‐Cox type. For a wide range of fractional powers, this paper gives the relative bias in original metric forecasts due to use of the simple inverse retransformation when minimum mean squared error (conditional mean) forecasts are optimal. This bias varies widely according to the characteristics of the data. A fast algorithm is given to find this bias, or to find minimum mean squared error forecasts in the original metric. The results depend on the assumption that the forecast errors in the transformed metric are Gaussian. An example using real data is given.Keywords
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