• Box Jenkins Model

    Pages: 4

    This 4 page paper considers the statement that the Box Jenkins methodology of forecasting is not an explanatory method but a simple statistical method. The bibliography cites 10 sources.

    File: TS14_TEboxjen.rtf

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    Box Jenkins Model United Kingdom, April 2003. To Use This Report Correctly,   There are many different forms of forecasting. One of the tools that has been seen to add a great deal of value is the Box Jenkins  model, described by some as a statistician dream (Pankratz, 1993). However, it has been argued that the model may not undertake all we may wish and that Box Jenkins is  not an explanatory method but a simple statistical method. To consider if this statement is true, and this is only a statistical tool the method itself need to be examined.  In looking at this model it has a wide range of uses, from science to business. Logically there must be a value to this tool. This model is a  type of ARMA or ARIMA, meaning auto regressive integrated moving average (Brewley, 2003). This starts to indicate there is more than simply statistical analysis, as their is an element of  regressive analysis included in the model (Brewley, 2003). This model makes use of the wide range of ARMA models that are available,  and then, when the model is chosen subjects the model to a range of diagnostic tests (Vandaele, 1983, Hill, 1975). The tests will either be passed in which case  the chosen model was the appropriate model. Or where models do not pass the test a new model will be suggested and then the diagnostic tests will be carried out  again. This may occur repeatedly until a suitable model is found (Brewley, 2003, Hill, 1975). Therefore, there is a system of 

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