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Disclaimer: I am relatively new to time series analysis, so I am not sure if my way of thinking makes sense.

I have a time series of a few years, that I can model relatively well (respectable R squared, and normally distributed errors). However, in the last year of the data set, a series of effects happened that I am almost sure of had a large combined effect on the observed variable. Evidence of this is the fact that for this year, the residuals are no longer normally distributed and show a large upward bias.

I would like to capture this 'combined effect' in the model, by looking at the residuals. I am wondering whether it is possible to regard the residuals as a sum of a signal (of this combined effect) and noise, and to model it accordingly.

Is this a valid method?

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  • $\begingroup$ This thing which happened, can you include some variables in your model to account for this? $\endgroup$ Apr 25, 2023 at 15:19
  • $\begingroup$ Welcome to CV, eork. Just as a comment: Perhaps you might study up on 'error correction models' as explicitly modeling part of the data generating process. $\endgroup$
    – Alexis
    Apr 25, 2023 at 15:20
  • $\begingroup$ @user2974951 I have thought about adding a dummy variable, but it's not a constant effect. After it has started at time, say, t, it changes over time. If you have a suggestion as to how to model that, I would love to hear it. $\endgroup$
    – eork
    May 2, 2023 at 12:30

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