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Case Study on Time Series ARIMA Modeling

Case Description

The analysis performed by PROC ARIMA is divided into three stages, corresponding to the stages
described by Box and Jenkins (1976). The IDENTIFY, ESTIMATE, and FORECAST statements perform these
three stages.

In the identification stage, you use the IDENTIFY statement to specify the response series and identify
candidate ARIMA models for it. The IDENTIFY statement reads time series that are to be used in later
statements, possibly differencing them, and computes autocorrelations, inverse autocorrelations, partial
Autocorrelations, and cross correlations. Stationary tests can be performed to determine if differencing
is necessary.

In the estimation and diagnostic checking stage, you use the ESTIMATE statement to specify the ARIMA
model to fit to the variable specified in the previous IDENTIFY statement, and to estimate the
parameters of that model. The ESTIMATE statement also produces diagnostic statistics to help you judge
the adequacy of the model.

In the forecasting stage you use the FORECAST statement to forecast future values of the time series
and to generate confidence intervals for these forecasts from the ARIMA model produced by the
preceding ESTIMATE statement.

The Data
The data has two variables sales and date. The data explains the monthly sales figures of a retail outlet
from July 1989 till July 1991.
Variable description:
Sales: Sales of the retail outlet in thousand liters.
Date: date is given from July 1989 to July 1991.






The information provided on these pages remains, unless otherwise stated, the copyright of the respective authors. All layout , design, original graphics, concepts and
other World Wide Web Intellectual Property Rights barring the information mentioned above, remains the property and copyright of OrangeTree Global

Problem set of the case study
1) Conduct a stepwise identification procedure to check for Non stationarity for the series.

2) Interpret the Simple autocorrelation function (ACF), Inverse Autocorrelation and Partial
Autocorrelation function (PACF).

3) Interpret the Autocorrelation test for the white noise from the SAS output.

4) If the series is coming to be a non stationary series then run SAS codes to convert the series
into a stationary series. What are the steps required for converting it into a stationary series?
Interpret the result at each stage from the SAS output.

5) Determine whether the series has become stationary or not and then identify the order of AR
and MA for the estimation stage.

a) Is it an AR process or MA process? Determine the order of AR and MA of the series.
b) Also, check the order of differencing needed to reach at stationarity from the identification
stage.

6) In the forecasting stage provide the forecasting for the sales one year ahead from the most
recently available sales figure (July 1991).

7) Graphically show the actual series versus the Forecasted series using suitable SAS Codes.