Definition:Moving Average Model/Parameter

Definition

Let $S$ be a stochastic process based on an equispaced time series.

Let the values of $S$ at timestamps $t, t - 1, t - 2, \dotsc$ be $z_t, z_{t - 1}, z_{t - 2}, \dotsc$

Let $\tilde z_t$ be the deviation from a constant mean level $\mu$:

$\tilde z_t = z_t - \mu$

Let $a_t, a_{t - 1}, a_{t - 2}, \dotsc$ be a sequence of independent shocks at timestamps $t, t - 1, t - 2, \dotsc$

Let $M$ be an moving average model on $S$ of order $q$:

$\tilde z_t = a_t - \theta_1 a_{t - 1} - \theta_2 a_{t - 2} - \dotsb - \theta_q a_{t - q}$

The parameters of $M$ consist of:

the constant mean level $\mu$

the variance $\sigma_a^2$ of the underlying (usually white noise) process of the independent shocks $a_t$

the coefficients $\theta_1$ to $\theta_q$.

In practice, each of these parameters needs to be estimated from the data.

Sources

• 1994: George E.P. Box, Gwilym M. Jenkins and Gregory C. Reinsel: Time Series Analysis: Forecasting and Control (3rd ed.) ... (previous) ... (next):

$1$: Introduction:

$1.2$ Stochastic and Deterministic Dynamic Mathematical Models

$1.2.1$ Stationary and Nonstationary Stochastic Models for Forecasting and Control: Moving average models