6
$\begingroup$

I'm experiencing an issue in which it seems forecast::auto.arima() isn't returning a model with a differencing parameter when it should. Read through my reproducible example to arrive at the question.

I have the following data:

library(magrittr)
library(dplyr)

mydata <- c(305, 348, 337, 350, 368, 345, 370, 291, 337, 323, 328, 307, 
            299, 323, 292, 273, 282, 333, 325, 322, 298, 306, 339, 320, 
            348, 349, 381, 331, 373, 349, 307, 321, 347, 304, 314, 273, 
            309, 300, 266, 280, 318, 346, 399, 360, 394, 447, 420, 417, 
            341, 320, 292, 264, 264, 276, 292, 284, 219, 252)

Which I then convert to a univariate time series object (and clean):

global_ts <- ts(data=mydata, start=1960, end=2017, frequency=1) %>%
  forecast::tsclean(.)

The data look like this:

ggplot2::autoplot(global_ts) +
  ggplot2::theme_bw() +
  ggplot2::geom_line(size=0.6) +
  ggplot2::geom_point(shape = 21, colour = "black", fill = "dodgerblue", size = 3, stroke = 1) +
  ggplot2::labs(x="\nTime [years]") +
  ggplot2::theme(axis.text.x  = ggplot2::element_text(size=12)) +
  ggplot2::theme(axis.text.y  = ggplot2::element_text(size=12)) +
  ggplot2::theme(axis.title.x = ggplot2::element_text(size=18)) +
  ggplot2::theme(axis.title.y = ggplot2::element_text(size=18))

enter image description here

These data are not stationary:

 tseries::adf.test(global_ts)

enter image description here

The data show autocorrelation:

acf(global_ts, lag.max = 20)

enter image description here

The data show partial autocorrelation: enter image description here

To stationarize the data, I decided to calculate the first difference:

global_ts_difference_lag_1 = diff(global_ts, differences = 1)

The first differences look like this:

ggplot2::autoplot(global_ts_difference_lag_1) +
  ggplot2::theme_bw() +
  ggplot2::geom_line(size=0.6) +
  ggplot2::geom_point(shape = 21, colour = "black", fill = "dodgerblue", size = 3, stroke = 1) +
  ggplot2::labs(x="\nTime [years]") +
  ggplot2::theme(axis.text.x  = ggplot2::element_text(size=12)) +
  ggplot2::theme(axis.text.y  = ggplot2::element_text(size=12)) +
  ggplot2::theme(axis.title.x = ggplot2::element_text(size=18)) +
  ggplot2::theme(axis.title.y = ggplot2::element_text(size=18)) 

enter image description here

The first order differenced data is stationary:

tseries::adf.test(global_ts_difference_lag_1)

enter image description here

The first order differenced data show no autocorrelation:

acf(global_ts_difference_lag_1, lag.max = 20)

enter image description here

The first order differenced data show no partial autocorrelation (note: it's acceptable to have one line eclipse the 95% confidence intervals because 19/20 = 0.95):

pacf(global_ts_difference_lag_1, lag.max = 20)

enter image description here

I performed an ARIMA using forecast::auto.arima():

forecast::auto.arima(global_ts, ic="aic", trace=TRUE, stepwise = FALSE)

The forecast::auto.arima() function returned a non-differenced ARIMA, even though the data are clearly non-stationary without differencing...

enter image description here

If I forecast using ARIMA(1,0,0), I get the following:

global_arima <- arima(global_ts, order=c(1,0,0), include.mean = TRUE)
global_arima

enter image description here

plot(forecast::forecast(global_arima, h=11, level=95))

enter image description here

NOW, If I specify first order differencing as an argument in the forecast::auto.arima() function, it returns a different model:

forecast::auto.arima(global_ts, ic="aic", d=1, trace=TRUE, stepwise = FALSE)

enter image description here

If I forecast using ARIMA(1,1,0), I get the following:

global_arima <- arima(global_ts, order=c(1,1,0), include.mean = TRUE)
global_arima

enter image description here

plot(forecast::forecast(global_arima, h=11, level=95))

enter image description here

MY QUESTION IS THE FOLLOWING -

Why isn't forecast::auto.arima() correctly performing a check for differencing?

The documentation for forecast::auto.arima() says the 'd' argument is the "order of first-differencing. If missing, will choose a value based on KPSS test."

Is forecast::auto.arima() actually choosing a value for differencing (d) based on the KPSS test? It seems to not actually be doing this...

To cover my bases, I performed a manual KPSS test, which resulted in clear non-stationarity for the original time series:

tseries::kpss.test(global_ts)

enter image description here

What gives? Am I missing something? Which forecast should I trust?

Oh and I should also mention that I get strange results when using forecast::ndiffs(), which is supposed to tell the user the number of differences are required to achieve stationarity. The test performed seems to dictate the outcome...

forecast::ndiffs(global_ts, test="kpss")

enter image description here

forecast::ndiffs(global_ts, test="adf")

enter image description here

forecast::ndiffs(global_ts, test="pp")

enter image description here

Why would these tests give such wildly different results? Further, why would tseries::kpss.test() give different results than forecast::ndiffs()??

$\endgroup$

migrated from stackoverflow.com Jun 15 '18 at 19:51

This question came from our site for professional and enthusiast programmers.

  • $\begingroup$ What happens if, instead of differencing, you create the new series as $z_t = y_t - 0.7y_{t-1}$? I am guessing that, again, you'll find the new series is stationary, etc. $\endgroup$ – jbowman Jun 15 '18 at 20:54
  • $\begingroup$ KPSS has a null hypothesis of stationarity. So it is consistent with ndiffs(). $\endgroup$ – Rob Hyndman Jun 17 '18 at 15:17
  • $\begingroup$ Thanks Rob! Good point about the KPSS null hypothesis, I stand corrected! Judging from acf and pacf, I would say the data are autocorrelated and therefore non-stationary, despite the fact that KPSS test fails to reject the null of stationarity. This leads me to a crossroads: forecast::auto.arima() with test='kpss' returns ARIMA(1,0,0) while forecast::auto.arima() with test='pp' returns ARIMA(1,1,0). I get an error when running forecast::auto.arima() test='adf'. I have your 2nd edition Forecasting book right here, so I'm all ears. Which direction would you go? $\endgroup$ – awags1 Jun 18 '18 at 11:58
0
$\begingroup$

auto.arima is a brute force list-based procedure that tries a fixed set of models and selects the calculated AIC based upon estimated parameters. The AIC should be calculated from residuals using models that control for intervention administration, otherwise the intervention effects are taken to be Gaussian noise, underestimating the actual model's autoregressive effect and thus miscalculates the model parameters which leads directly to an incorrect error sum of squares and ultimately an incorrect AIC. More importantly the only remedy it has for non-stationarity ( besides power transforms ) is to suggest differencing.

I took the 58 values and used AUTOBOX (my tool of choice .. since I helped to develop it ! )to automatically identify a possible arima model with any needed Interventions effects included. The model identified (arima portion) is remarkably similar to auto.arima with the exception that the forecast assymptotes to a much lower level. This is due to the detection and incorporation of a level shift (N.B. a level shift refelects that de-meaning the series is needed NOT differencing the series as the suggested cause of the non-stationarity ).

The equation is here with a level shift at period 48 .

enter image description here with statistics here enter image description here

The residuals from the model are here enter image description here with acf here enter image description here . The plot of the forecasts is here enter image description here

Finally the reflection by @jbowman is well intended as it highlights the AR(1) as deficient due to the untreated anomalous structure in the residuals i.e. the level shift at period 48 . Note the permanent drop-off (level shift) at period 48 . Manual/visual detecting the need for a level shift in the model can sometimes be done in this manner by identifying structure in a tentative set of residuals.

enter image description here

In closing , the adf tests you cited have assumptions .. one of them is no pulses , level shifts , local time trends or seasonal pulses are needed. That is possibly why your are experiencing a conundrum . Test assumptions are very important .

IN answer to your question/comment .... The series is non-stationary BUT differencing is not needed.

$\endgroup$
  • $\begingroup$ What say you OP ? $\endgroup$ – IrishStat Jun 25 '18 at 9:46

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.