I need to use exogenous variables for my time series forecasting.
And I found that I can include my exogenous variables into my ARIMA model using exogenous option.
I want to know how this option works.
Statsmodels docoument(https://www.statsmodels.org/stable/generated/statsmodels.tsa.arima_model.ARIMA.html) says
" If exogenous variables are given, then the model that is fit is
where ϕ and θ are polynomials in the lag operator, L. This is the regression model with ARMA errors, or ARMAX model. "
I cannot understand what this formula means.
I googled it and found what lag operator is.
But I still don't understand what the above formula implies.
I'm a undergraduate and took regression course.
Could you explain above formula in terms of regression?