ForeCasting Google Share Prices

Sample: last 10 years data(weekly) Sample size: 416

1. Augmented Dickey Fuller Unit Test for Stationarity:

ADF Test Statistics(0.52)> Critical value at all level (-1.94) Hence cannot reject null hypothesis, so the Series is Non-Stationary Also, Durbin-Watson Statistics(1.95)<2, so there is positive autocorrelation.

ADF Test for 1st difference

ADF Test Statistics(-19.8)< Critical value at all level Hence, we cannot reject null hypothesis, so the 1st difference of the Series is Stationary Also, Durbin-Watson Statistics=2, so there is no autocorrelation.

2. ACF PACF Test to determine Model at 1st difference

3. Estimating Model from pValue< 0.05 & Minimum AIC, BIC value MA(2) is the best fit

AR(2) MA(2) also has pValue<0.05 but not minimum AIC, BIC hence it is not optimal

AR(2)MA(2) MA(2)

AIC 8.906 8.897

BIC 8.935 8.916

MA(2) has minimum AIC BIC values, hence it is the optimal model.

4. Forecasting in the existing sample:

Normality test
The residuals are not normal. Jarque-Bera = 35 greater than 5.991(critical value at 95% confidence level) So, null hypothesis is rejected.

Test for residual to be white noise and having no pattern

White test of Heteroskedasticity :

There is heteroskedasticity in the model as nR^2 (10.8) > Chi-square (0.0287) Null Hypothesis is rejected.

Breusch Godfrey test for autocorrelation in residuals

There is no autocorrelation as Obs*R^2 (0.2382) < Chi-square (0.8877) Null hypotheses cannot be rejected.

After forecasting for 7 next weeks:

Two Graphs (Original & Forecasted)