CONTENTS

PREFACETOTHEFI
FTHEDI
TIONxi
x

PREFACETOTHEFOURTHEDI
TIONx
xii
i

PREFACETOTHETHI
RDEDI
TIONxxv

1I
ntr
oduct
ion1

1.
1Fi
veI
mpor
tantPr
act
ical
Probl
ems,
2

1.
1.1For
ecast
ingTi
meSer
ies,
2

1.
1.2Est
imat
ionofTr
ansf
erFunct
ions,
3

1.
1.3Anal
ysi
sofEf
fect
sofUnusual
Int
erv
ent
ionEv
ent
stoaSy
stem,
4

1.
1.4Anal
ysi
sofMul
ti
var
iat
eTi
meSer
ies,
4

1.
1.5Di
scr
eteCont
rol
Syst
ems,
5

1.
2St
ochast
icandDet
ermi
nist
icDy
nami
cMat
hemat
ical
Model
s,6

1.
2.1St
ati
onar
yandNonst
ati
onar
ySt
ochast
icModel
sforFor
ecast
ing
andCont
rol
,7

1.
2.2Tr
ansf
erFunct
ionModel
s,11

1.
2.3Model
sforDi
scr
eteCont
rol
Syst
ems,
13

1.
3Basi
cIdeasi
nModel
Bui
l
ding,
14

1.
3.1Par
simony
,14

1.
3.2I
ter
ati
veSt
agesi
ntheSel
ect
ionofaModel
,15

Appendi
xA1.
1Useoft
heRSof
twar
e,17

Exer
cises,
18

PARTONESTOCHASTI
CMODELSANDTHEI
RFORECASTI
NG19

2Aut
ocor
rel
ati
onFunct
ionandSpect
rum ofSt
ati
onar
yPr
ocesses21

2.
1Aut
ocor
rel
ati
onPr
oper
ti
esofSt
ati
onar
yModel
s,21

2.
1.1Ti
meSer
iesandSt
ochast
icPr
ocesses,
21
2.
1.2St
ati
onar
ySt
ochast
icPr
ocesses,
24

2.
1.3Posi
ti
veDef
ini
tenessandt
heAut
ocov
ari
anceMat
ri
x,26

2.
1.4Aut
ocov
ari
anceandAut
ocor
rel
ati
onFunct
ions,
29

2.
1.5Est
imat
ionofAut
ocov
ari
anceandAut
ocor
rel
ati
onFunct
ions,
30

2.
1.6St
andar
dEr
ror
sofAut
ocor
rel
ati
onEst
imat
es,
31

2.
2Spect
ral
Proper
ti
esofSt
ati
onar
yModel
s,34

2.
2.1Per
iodogr
am ofaTi
meSer
ies,
34

2.
2.2Anal
ysi
sofVar
iance,
35

2.
2.3Spect
rum andSpect
ral
Densi
tyFunct
ion,
36

2.
2.4Si
mpl
eExampl
esofAut
ocor
rel
ati
onandSpect
ral
Densi
ty

Funct
ions,
40

2.
2.5Adv
ant
agesandDi
sadv
ant
agesoft
heAut
ocor
rel
ati
onandSpect
ral

Densi
tyFunct
ions,
43
Appendi
xA2.
1Li
nkBet
weent
heSampl
eSpect
rum andAut
ocov
ari
ance

Funct
ionEst
imat
e,43

Exer
cises,
44

3Li
nearSt
ati
onar
yModel
s47

3.
1Gener
alLi
nearPr
ocess,
47

3.
1.1TwoEqui
val
entFor
msf
ort
heLi
nearPr
ocess,
47

3.
1.2Aut
ocov
ari
anceGener
ati
ngFunct
ionofaLi
nearPr
ocess,
50

3.
1.3St
ati
onar
it
yandI
nver
ti
bil
i
tyCondi
ti
onsf
oraLi
nearPr
ocess,
51

3.
1.4Aut
oregr
essi
veandMov
ingAv
eragePr
ocesses,
52

3.
2Aut
oregr
essi
vePr
ocesses,
54

3.
2.1St
ati
onar
it
yCondi
ti
onsf
orAut
oregr
essi
vePr
ocesses,
54

3.
2.2Aut
ocor
rel
ati
onFunct
ionandSpect
rum ofAut
oregr
essi
ve
Pr
ocesses,
56

3.
2.3TheFi
rst
-Or
derAut
oregr
essi
vePr
ocess,
58

3.
2.4Second-
OrderAut
oregr
essi
vePr
ocess,
59

3.
2.5Par
ti
alAut
ocor
rel
ati
onFunct
ion,
64

3.
2.6Est
imat
ionoft
hePar
ti
alAut
ocor
rel
ati
onFunct
ion,
66

3.
2.7St
andar
dEr
ror
sofPar
ti
alAut
ocor
rel
ati
onEst
imat
es,
66

3.
2.8Cal
cul
ati
onsi
nR,
67

3.
3Mov
ingAv
eragePr
ocesses,
68

3.
3.1I
nver
ti
bil
i
tyCondi
ti
onsf
orMov
ingAv
eragePr
ocesses,
68

3.
3.2Aut
ocor
rel
ati
onFunct
ionandSpect
rum ofMov
ingAv
erage

Pr
ocesses,
69

3.
3.3Fi
rst
-Or
derMov
ingAv
eragePr
ocess,
70

3.
3.4Second-
OrderMov
ingAv
eragePr
ocess,
71
3.
3.5Dual
i
tyBet
weenAut
oregr
essi
veandMov
ingAv
eragePr
ocesses,
75

3.
4Mi
xedAut
oregr
essi
ve-
-Mov
ingAv
eragePr
ocesses,
75

3.
4.1St
ati
onar
it
yandI
nver
ti
bil
i
tyPr
oper
ti
es,
75

3.
4.2Aut
ocor
rel
ati
onFunct
ionandSpect
rum ofMi
xedPr
ocesses,
77

3.
4.3Fi
rstOr
derAut
oregr
essi
veFi
rst
-Or
derMov
ingAv
eragePr
ocess,
78

3.
4.4Summar
y,81

Appendi
xA3.
1Aut
ocov
ari
ances,
Aut
ocov
ari
anceGener
ati
ngFunct
ion,
and

St
ati
onar
it
yCondi
ti
onsf
oraGener
alLi
nearPr
ocess,
82

Appendi
xA3.
2Recur
siv
eMet
hodf
orCal
cul
ati
ngEst
imat
esof

Aut
oregr
essi
vePar
amet
ers,
84

Exer
cises,
86

4Li
nearNonst
ati
onar
yModel
s88

4.
1Aut
oregr
essi
veI
ntegr
atedMov
ingAv
eragePr
ocesses,
88
4.
1.1Nonst
ati
onar
yFi
rst
-Or
derAut
oregr
essi
vePr
ocess,
88

4.
1.2Gener
alModel
foraNonst
ati
onar
yPr
ocessExhi
bit
ing

Homogenei
ty,
90

4.
1.3Gener
alFor
m oft
heARI
MAModel
,94

4.
2Thr
eeEx
pli
citFor
msf
ort
heARI
MAModel
,97

4.
2.1Di
ff
erenceEquat
ionFor
m oft
heModel
,97

4.
2.2Random ShockFor
m oft
heModel
,98

4.
2.3I
nver
tedFor
m oft
heModel
,103

4.
3Int
egr
atedMov
ingAv
eragePr
ocesses,
106

4.
3.1I
ntegr
atedMov
ingAv
eragePr
ocessofOr
der(
0,1,
1),
107

4.
3.2I
ntegr
atedMov
ingAv
eragePr
ocessofOr
der(
0,2,
2),
110

4.
3.3Gener
alI
ntegr
atedMov
ingAv
eragePr
ocessofOr
der(
0, , )
,114
Appendi
xA4.
1Li
nearDi
ff
erenceEquat
ions,
116

Appendi
xA4.
2IMA(
0,1,
1)Pr
ocesswi
thDet
ermi
nist
icDr
if
t,121

Appendi
xA4.
3ARI
MAPr
ocesseswi
thAddedNoi
se,
122

A4.
3.1Sum ofTwoI
ndependentMov
ingAv
eragePr
ocesses,
122

A4.
3.2Ef
fectofAddedNoi
seont
heGener
alModel
,123

A4.
3.3Exampl
eforanI
MA(
0,1,
1)Pr
ocesswi
thAddedWhi
te

Noi
se,
124

A4.
3.4Rel
ati
onbet
weent
heI
MA(
0,1,
1)Pr
ocessandaRandom

Wal
k,125

A4.
3.5Aut
ocov
ari
anceFunct
ionoft
heGener
alModel
wit
hAdded

Cor
rel
atedNoi
se,
125

Exer
cises,
126

5For
ecast
ing129
5.
1Mi
nimum MeanSquar
eEr
rorFor
ecast
sandThei
rPr
oper
ti
es,
129

5.
1.1Der
ivat
ionoft
heMi
nimum MeanSquar
eEr
rorFor
ecast
s,131

5.
1.2Thr
eeBasi
cFor
msf
ort
heFor
ecast
,132

5.
2Cal
cul
ati
ngFor
ecast
sandPr
obabi
l
ityLi
mit
s,135

5.
2.1Cal
cul
ati
onof Wei
ght
s,135

5.
2.2Useoft
he Wei
ght
sinUpdat
ingt
heFor
ecast
s,136

5.
2.3Cal
cul
ati
onoft
hePr
obabi
l
ityLi
mit
satDi
ff
erentLeadTi
mes,
137

5.
2.4Cal
cul
ati
onofFor
ecast
sUsi
ngR,
138

5.
3For
ecastFunct
ionandFor
ecastWei
ght
s,139

5.
3.1Ev
ent
ual
For
ecastFunct
ionDet
ermi
nedbyt
heAut
oregr
essi
ve

Oper
ator
,140

5.
3.2Rol
eoft
heMov
ingAv
erageOper
atori
nFi
xi
ngt
heI
nit
ial

Val
ues,
140
5.
3.3Leadl
For
ecastWei
ght
s,142

5.
4Exampl
esofFor
ecastFunct
ionsandThei
rUpdat
ing,
144

5.
4.1For
ecast
inganI
MA(
0,1,
1)Pr
ocess,
144

5.
4.2For
ecast
inganI
MA(
0,2,
2)Pr
ocess,
147

5.
4.3For
ecast
ingaGener
alI
MA(
0,d,
q)Pr
ocess,
149

5.
4.4For
ecast
ingAut
oregr
essi
vePr
ocesses,
150

5.
4.5For
ecast
inga(
1,0,
1)Pr
ocess,
153

5.
4.6For
ecast
inga(
1,1,
1)Pr
ocess,
154

5.
5UseofSt
ate-
SpaceModel
For
mul
ati
onf
orExactFor
ecast
ing,
155

5.
5.1St
ate-
SpaceModel
Repr
esent
ati
onf
ort
heARI
MAPr
ocess,
155

5.
5.2Kal
manFi
l
ter
ingRel
ati
onsf
orUsei
nPr
edi
cti
on,
157

5.
5.3Smoot
hingRel
ati
onsi
ntheSt
ateVar
iabl
eModel
,160
5.
6Summar
y,162

Appendi
xA5.
1Cor
rel
ati
onBet
weenFor
ecastEr
ror
s,164

A5.
1.1Aut
ocor
rel
ati
onFunct
ionofFor
ecastEr
ror
satDi
ff
erent

Or
igi
ns,
164

A5.
1.2Cor
rel
ati
onBet
weenFor
ecastEr
ror
satt
heSameOr
igi
nwi
th

Di
ff
erentLeadTi
mes,
165

Appendi
xA5.
2For
ecastWei
ght
sforanyLeadTi
me,
166

Appendi
xA5.
3For
ecast
ingi
nTer
msoft
heGener
alI
ntegr
atedFor
m,168

A5.
3.1Gener
alMet
hodofObt
aini
ngt
heI
ntegr
atedFor
m,168

A5.
3.2Updat
ingt
heGener
alI
ntegr
atedFor
m,170

A5.
3.3Compar
isonwi
tht
heDi
scount
edLeast
-Squar
esMet
hod,
171

Exer
cises,
174

PARTTWOSTOCHASTI
CMODELBUI
LDI
NG177
6Model
Ident
if
icat
ion179

6.
1Obj
ect
ivesofI
dent
if
icat
ion,
179

6.
1.1St
agesi
ntheI
dent
if
icat
ionPr
ocedur
e,180

6.
2Ident
if
icat
ionTechni
ques,
180

6.
2.1Useoft
heAut
ocor
rel
ati
onandPar
ti
alAut
ocor
rel
ati
onFunct
ions

i
nIdent
if
icat
ion,
180

6.
2.2St
andar
dEr
ror
sforEst
imat
edAut
ocor
rel
ati
onsandPar
ti
al

Aut
ocor
rel
ati
ons,
183

6.
2.3I
dent
if
icat
ionofModel
sforSomeAct
ual
TimeSer
ies,
185

6.
2.4SomeAddi
ti
onal
Model
Ident
if
icat
ionTool
s,190

6.
3Ini
ti
alEst
imat
esf
ort
hePar
amet
ers,
194

6.
3.1Uni
quenessofEst
imat
esObt
ainedf
rom t
heAut
ocov
ari
ance
Funct
ion,
194

6.
3.2I
nit
ial
Est
imat
esf
orMov
ingAv
eragePr
ocesses,
194

6.
3.3I
nit
ial
Est
imat
esf
orAut
oregr
essi
vePr
ocesses,
196

6.
3.4I
nit
ial
Est
imat
esf
orMi
xedAut
oregr
essi
ve-
-Mov
ingAv
erage

Pr
ocesses,
197

6.
3.5I
nit
ial
Est
imat
eofEr
rorVar
iance,
198

6.
3.6Appr
oxi
mat
eSt
andar
dEr
rorf
or ,
199

6.
3.7Choi
ceBet
weenSt
ati
onar
yandNonst
ati
onar
yModel
sinDoubt
ful

Cases,
200

6.
4Model
Mul
ti
pli
cit
y,202

6.
4.1Mul
ti
pli
cit
yofAut
oregr
essi
ve-
-Mov
ingAv
erageModel
s,202

6.
4.2Mul
ti
pleMomentSol
uti
onsf
orMov
ingAv
eragePar
amet
ers,
204

6.
4.3Useoft
heBackwar
dPr
ocesst
oDet
ermi
neSt
art
ingVal
ues,
205
Appendi
xA6.
1Expect
edBehav
ioroft
heEst
imat
edAut
ocor
rel
ati
onFunct
ion

f
oraNonst
ati
onar
yPr
ocess,
206

Exer
cises,
207

7Par
amet
erEst
imat
ion209

7.
1St
udyoft
heLi
kel
i
hoodandSum-
of-
Squar
esFunct
ions,
209

7.
1.1Li
kel
i
hoodFunct
ion,
209

7.
1.2Condi
ti
onal
Likel
i
hoodf
oranARI
MAPr
ocess,
210

7.
1.3Choi
ceofSt
art
ingVal
uesf
orCondi
ti
onal
Cal
cul
ati
on,
211

7.
1.4Uncondi
ti
onal
Likel
i
hood,
Sum-
of-
Squar
esFunct
ion,
and

Least
-Squar
esEst
imat
es,
213

7.
1.5Gener
alPr
ocedur
eforCal
cul
ati
ngt
heUncondi
ti
onal
Sum of

Squar
es,
216

7.
1.6Gr
aphi
cal
Studyoft
heSum-
of-
Squar
esFunct
ion,
218
7.
1.7Exami
nat
ionoft
heLi
kel
i
hoodFunct
ionandConf
idence

Regi
ons,
220

7.
2Nonl
i
nearEst
imat
ion,
226

7.
2.1Gener
alMet
hodofAppr
oach,
226

7.
2.2Numer
ical
Est
imat
esoft
heDer
ivat
ives,
227

7.
2.3Di
rectEv
aluat
ionoft
heDer
ivat
ives,
228

7.
2.4Gener
alLeast
-Squar
esAl
gor
it
hm f
ort
heCondi
ti
onal
Model
,229

7.
2.5ARI
MAModel
sFi
tt
edt
oSer
iesA-
-F,
231

7.
2.6Lar
ge-
Sampl
eInf
ormat
ionMat
ri
cesandCov
ari
anceEst
imat
es,
233

7.
3SomeEst
imat
ionResul
tsf
orSpeci
fi
cModel
s,236

7.
3.1Aut
oregr
essi
vePr
ocesses,
236

7.
3.2Mov
ingAv
eragePr
ocesses,
238
7.
3.3Mi
xedPr
ocesses,
238

7.
3.4Separ
ati
onofLi
nearandNonl
i
nearComponent
sinEst
imat
ion,
239

7.
3.5Par
amet
erRedundancy
,240

7.
4Li
kel
i
hoodFunct
ionBasedont
heSt
ate-
SpaceModel
,242

7.
5Est
imat
ionUsi
ngBay
es’
Theor
em,
245

7.
5.1Bay
es’
Theor
em,
245

7.
5.2Bay
esi
anEst
imat
ionofPar
amet
ers,
246

7.
5.3Aut
oregr
essi
vePr
ocesses,
247

7.
5.4Mov
ingAv
eragePr
ocesses,
249

7.
5.5Mi
xedPr
ocesses,
250

Appendi
xA7.
1Rev
iewofNor
mal
Dist
ri
but
ionTheor
y,251

A7.
1.1Par
ti
ti
oni
ngofaPosi
ti
ve-
Def
ini
teQuadr
ati
cFor
m,251

A7.
1.2TwoUsef
ulI
ntegr
als,
252
A7.
1.3Nor
mal
Dist
ri
but
ion,
253

A7.
1.4St
udent
’s Di
str
ibut
ion,
255

Appendi
xA7.
2Rev
iewofLi
nearLeast
-Squar
esTheor
y,256

A7.
2.1Nor
mal
Equat
ionsandLeastSquar
es,
256

A7.
2.2Est
imat
ionofEr
rorVar
iance,
257

A7.
2.3Cov
ari
anceMat
ri
xofLeast
-Squar
esEst
imat
es,
257

A7.
2.4Conf
idenceRegi
ons,
257

A7.
2.5Cor
rel
atedEr
ror
s,258

Appendi
xA7.
3ExactLi
kel
i
hoodFunct
ionf
orMov
ingAv
erageandMi
xed

Pr
ocesses,
259

Appendi
xA7.
4ExactLi
kel
i
hoodFunct
ionf
oranAut
oregr
essi
vePr
ocess,
266

Appendi
xA7.
5Asy
mpt
oti
cDi
str
ibut
ionofEst
imat
orsf
orAut
oregr
essi
ve

Model
s,274
Appendi
xA7.
6Exampl
esoft
heEf
fectofPar
amet
erEst
imat
ionEr
ror
son

Var
iancesofFor
ecastEr
ror
sandPr
obabi
l
ityLi
mit
sforFor
ecast
s,277

Appendi
xA7.
7Speci
alNot
eonEst
imat
ionofMov
ingAv
eragePar
amet
ers,
280

Exer
cises,
280

8Model
Diagnost
icChecki
ng284

8.
1Checki
ngt
heSt
ochast
icModel
,284

8.
1.1Gener
alPhi
l
osophy
,284

8.
1.2Ov
erf
it
ti
ng,
285

8.
2Di
agnost
icChecksAppl
i
edt
oResi
dual
s,287

8.
2.1Aut
ocor
rel
ati
onCheck,
287

8.
2.2Por
tmant
eauLack-
of-
FitTest
,289

8.
2.3Model
InadequacyAr
isi
ngf
rom Changesi
nPar
amet
erVal
ues,
294
8.
2.4Scor
eTest
sforModel
Checki
ng,
295

8.
2.5Cumul
ati
vePer
iodogr
am Check,
297

8.
3UseofResi
dual
stoModi
fyt
heModel
,301

8.
3.1Nat
ureoft
heCor
rel
ati
onsi
ntheResi
dual
sWhenanI
ncor
rect

Model
IsUsed,
301

8.
3.2UseofResi
dual
stoModi
fyt
heModel
,302

Exer
cises,
303

9Anal
ysi
sofSeasonal
TimeSer
ies305

9.
1Par
simoni
ousModel
sforSeasonal
TimeSer
ies,
305

9.
1.1Fi
tt
ingVer
susFor
ecast
ing,
306

9.
1.2Seasonal
Model
sInv
olv
ingAdapt
iveSi
nesandCosi
nes,
307

9.
1.3Gener
alMul
ti
pli
cat
iveSeasonal
Model
,308

9.
2Repr
esent
ati
onoft
heAi
rl
ineDat
abyaMul
ti
pli
cat
ive(
0,1,
1)×(
0,1,
1)12
Model
,310

9.
2.1Mul
ti
pli
cat
ive(
0,1,
1)×(
0,1,
1)12Model
,310

9.
2.2For
ecast
ing,
311

9.
2.3Model
Ident
if
icat
ion,
318

9.
2.4Par
amet
erEst
imat
ion,
320

9.
2.5Di
agnost
icChecki
ng,
324

9.
3SomeAspect
sofMor
eGener
alSeasonal
ARI
MAModel
s,325

9.
3.1Mul
ti
pli
cat
iveandNonmul
ti
pli
cat
iveModel
s,325

9.
3.2Model
Ident
if
icat
ion,
327

9.
3.3Par
amet
erEst
imat
ion,
328

9.
3.4Ev
ent
ual
For
ecastFunct
ionsf
orVar
iousSeasonal
Model
s,329

9.
3.5Choi
ceofTr
ansf
ormat
ion,
331

9.
4St
ruct
ural
ComponentModel
sandDet
ermi
nist
icSeasonal
Component
s,331

9.
4.1St
ruct
ural
ComponentTi
meSer
iesModel
s,332

9.
4.2Det
ermi
nist
icSeasonal
andTr
endComponent
sandCommon

Fact
ors,
335

9.
4.3Est
imat
ionofUnobser
vedComponent
sinSt
ruct
ural
Model
s,336

9.
5Regr
essi
onModel
swi
thTi
meSer
iesEr
rorTer
ms,
339

9.
5.1Model
Bui
l
ding,
Est
imat
ion,
andFor
ecast
ingPr
ocedur
esf
or

Regr
essi
onModel
s,340

9.
5.2Rest
ri
ctedMaxi
mum Li
kel
i
hoodEst
imat
ionf
orRegr
essi
on

Model
s,344

Appendi
xA9.
1Aut
ocov
ari
ancesf
orSomeSeasonal
Model
s,345

Exer
cises,
349
10Addi
ti
onal
Topi
csandExt
ensi
ons352

10.
1Test
sforUni
tRoot
sinARI
MAModel
s,353

10.
1.1Test
sforUni
tRoot
sinARModel
s,353

10.
1.2Ext
ensi
onsofUni
tRootTest
ingt
oMi
xedARI
MAModel
s,358

10.
2Condi
ti
onal
Het
eroscedast
icModel
s,361

10.
2.1TheARCHModel
,362

10.
2.2TheGARCHModel
,366

10.
2.3Model
Bui
l
dingandPar
amet
erEst
imat
ion,
367

10.
2.4AnI
ll
ust
rat
iveExampl
e:Weekl
yS&P500LogRet
urns,
370

10.
2.5Ext
ensi
onsoft
heARCHandGARCHModel
s,372

10.
2.6St
ochast
icVol
ati
l
ityModel
s,377

10.
3Nonl
i
nearTi
meSer
iesModel
s,377

10.
3.1Cl
assesofNonl
i
nearModel
s,378
10.
3.2Det
ect
ionofNonl
i
near
it
y,381

10.
3.3AnEmpi
ri
cal
Exampl
e,382

10.
4LongMemor
yTi
meSer
iesPr
ocesses,
385

10.
4.1Fr
act
ional
l
yInt
egr
atedPr
ocesses,
385

10.
4.2Est
imat
ionofPar
amet
ers,
389

Exer
cises,
392

PARTTHREETRANSFERFUNCTI
ONANDMULTI
VARI
ATE

MODELBUI
LDI
NG395

11Tr
ansf
erFunct
ionModel
s397

11.
1Li
nearTr
ansf
erFunct
ionModel
s,397

11.
1.1Di
scr
eteTr
ansf
erFunct
ion,
398

11.
1.2Cont
inuousDy
nami
cModel
sRepr
esent
edbyDi
ff
erent
ial

Equat
ions,
400
11.
2Di
scr
eteDy
nami
cModel
sRepr
esent
edbyDi
ff
erenceEquat
ions,
404

11.
2.1Gener
alFor
m oft
heDi
ff
erenceEquat
ion,
404

11.
2.2Nat
ureoft
heTr
ansf
erFunct
ion,
406

11.
2.3Fi
rst
-andSecond-
OrderDi
scr
eteTr
ansf
erFunct
ionModel
s,407

11.
2.4Recur
siv
eComput
ati
onofOut
putf
orAnyI
nput
,412

11.
2.5Tr
ansf
erFunct
ionModel
swi
thAddedNoi
se,
413

11.
3Rel
ati
onBet
weenDi
scr
eteandCont
inuousModel
s,414

11.
3.1Responset
oaPul
sedI
nput
,415

11.
3.2Rel
ati
onshi
psf
orFi
rst
-andSecond-
OrderCoi
nci
dent

Sy
stems,
417

11.
3.3Appr
oxi
mat
ingGener
alCont
inuousModel
sbyDi
scr
ete

Model
s,419
Appendi
xA11.
1Cont
inuousModel
swi
thPul
sedI
nput
s,420

Appendi
xA11.
2Nonl
i
nearTr
ansf
erFunct
ionsandLi
near
izat
ion,
424

Exer
cises,
426

12I
dent
if
icat
ion,
Fit
ti
ng,
andChecki
ngofTr
ansf
erFunct
ionModel
s428

12.
1Cr
oss-
Cor
rel
ati
onFunct
ion,
429

12.
1.1Pr
oper
ti
esoft
heCr
oss-
Cov
ari
anceandCr
oss-
Cor
rel
ati
on

Funct
ions,
429

12.
1.2Est
imat
ionoft
heCr
oss-
Cov
ari
anceandCr
oss-
Cor
rel
ati
on

Funct
ions,
431

12.
1.3Appr
oxi
mat
eSt
andar
dEr
ror
sofCr
oss-
Cor
rel
ati
on

Est
imat
es,
433

12.
2Ident
if
icat
ionofTr
ansf
erFunct
ionModel
s,435

12.
2.1I
dent
if
icat
ionofTr
ansf
erFunct
ionModel
sbyPr
ewhi
teni
ngt
he
I
nput
,437

12.
2.2Exampl
eoft
heI
dent
if
icat
ionofaTr
ansf
erFunct
ionModel
,438

12.
2.3I
dent
if
icat
ionoft
heNoi
seModel
,442

12.
2.4SomeGener
alConsi
der
ati
onsi
nIdent
if
yingTr
ansf
erFunct
ion

Model
s,444

12.
3Fi
tt
ingandChecki
ngTr
ansf
erFunct
ionModel
s,446

12.
3.1Condi
ti
onal
Sum-
of-
Squar
esFunct
ion,
446

12.
3.2Nonl
i
nearEst
imat
ion,
447

12.
3.3UseofResi
dual
sforDi
agnost
icChecki
ng,
449

12.
3.4Speci
fi
cChecksAppl
i
edt
otheResi
dual
s,450

12.
4SomeExampl
esofFi
tt
ingandChecki
ngTr
ansf
erFunct
ionModel
s,453

12.
4.1Fi
tt
ingandChecki
ngoft
heGasFur
naceModel
,453
12.
4.2Si
mul
atedExampl
ewi
thTwoI
nput
s,458

12.
5For
ecast
ingwi
thTr
ansf
erFunct
ionModel
sUsi
ngLeadi
ngI
ndi
cat
ors,
461

12.
5.1Mi
nimum MeanSquar
eEr
rorFor
ecast
,461

12.
5.2For
ecastofCO2Out
putf
rom GasFur
nace,
465

12.
5.3For
ecastofNonst
ati
onar
ySal
esDat
aUsi
ngaLeadi
ng

I
ndi
cat
or,
468

12.
6SomeAspect
soft
heDesi
gnofExper
iment
stoEst
imat
eTr
ansf
er

Funct
ions,
469

Appendi
xA12.
1UseofCr
oss-
Spect
ral
Anal
ysi
sforTr
ansf
erFunct
ionModel

I
dent
if
icat
ion,
471

A12.
1.1I
dent
if
icat
ionofSi
ngl
e-I
nputTr
ansf
erFunct
ionModel
s,471

A12.
1.2I
dent
if
icat
ionofMul
ti
ple-
InputTr
ansf
erFunct
ionModel
s,472

Appendi
xA12.
2Choi
ceofI
nputt
oPr
ovi
deOpt
imal
Par
amet
erEst
imat
es,
473
A12.
2.1Desi
gnofOpt
imal
Input
sforaSi
mpl
eSy
stem,
473

A12.
2.2Numer
ical
Exampl
e,476

Exer
cises,
477

13I
nter
vent
ionAnal
ysi
s,Out
li
erDet
ect
ion,
andMi
ssi
ngVal
ues481

13.
1Int
erv
ent
ionAnal
ysi
sMet
hods,
481

13.
1.1Model
sforI
nter
vent
ionAnal
ysi
s,481

13.
1.2Exampl
eofI
nter
vent
ionAnal
ysi
s,484

13.
1.3Nat
ureoft
heMLEf
oraSi
mpl
eLev
elChangePar
amet
er

Model
,485

13.
2Out
li
erAnal
ysi
sforTi
meSer
ies,
488

13.
2.1Model
sforAddi
ti
veandI
nnov
ati
onal
Out
li
ers,
488

13.
2.2Est
imat
ionofOut
li
erEf
fectf
orKnownTi
mingoft
heOut
li
er,
489

13.
2.3I
ter
ati
vePr
ocedur
eforOut
li
erDet
ect
ion,
491
13.
2.4Exampl
esofAnal
ysi
sofOut
li
ers,
492

13.
3Est
imat
ionf
orARMAModel
swi
thMi
ssi
ngVal
ues,
495

13.
3.1St
ate-
SpaceModel
andKal
manFi
l
terwi
thMi
ssi
ngVal
ues,
496

13.
3.2Est
imat
ionofMi
ssi
ngVal
uesofanARMAPr
ocess,
498

Exer
cises,
502

14Mul
ti
var
iat
eTi
meSer
iesAnal
ysi
s505

14.
1St
ati
onar
yMul
ti
var
iat
eTi
meSer
ies,
506

14.
1.1Cr
oss-
Cov
ari
anceandCr
oss-
Cor
rel
ati
onMat
ri
ces,
506

14.
1.2Cov
ari
anceSt
ati
onar
it
y,507

14.
1.3Vect
orWhi
teNoi
sePr
ocess,
507

14.
1.4Mov
ingAv
erageRepr
esent
ati
onofaSt
ati
onar
yVect
or

Pr
ocess,
508
14.
2Vect
orAut
oregr
essi
veModel
s,509

14.
2.1VAR( )Model
,509

14.
2.2MomentEquat
ionsandYul
e--
Wal
kerEst
imat
es,
510

14.
2.3Speci
alCase:
VAR(
1)Model
,511

14.
2.4Numer
ical
Exampl
e,513

14.
2.5I
nit
ial
Model
Bui
l
dingandLeast
-Squar
esEst
imat
ionf
orVAR

Model
s,515

14.
2.6Par
amet
erEst
imat
ionandModel
Checki
ng,
518

14.
2.7AnEmpi
ri
cal
Exampl
e,519

14.
3Vect
orMov
ingAv
erageModel
s,524

14.
3.1Vect
orMA( )Model
,524

14.
3.2Speci
alCase:
Vect
orMA(
1)Model
,525

14.
3.3Numer
ical
Exampl
e,525
14.
3.4Model
Bui
l
dingf
orVect
orMAModel
s,526

14.
4Vect
orAut
oregr
essi
ve-
-Mov
ingAv
erageModel
s,527

14.
4.1St
ati
onar
it
yandI
nver
ti
bil
i
tyCondi
ti
ons,
527

14.
4.2Cov
ari
anceMat
ri
xPr
oper
ti
esofVARMAPr
ocesses,
528

14.
4.3Nonuni
quenessandPar
amet
erI
dent
if
iabi
l
ityf
orVARMA

Model
s,528

14.
4.4Model
Speci
fi
cat
ionf
orVARMAPr
ocesses,
529

14.
4.5Est
imat
ionandModel
Checki
ngf
orVARMAModel
s,532

14.
4.6Rel
ati
onofVARMAModel
stoTr
ansf
erFunct
ionandARMAX

Model
s,533

14.
5For
ecast
ingf
orVect
orAut
oregr
essi
ve-
-Mov
ingAv
eragePr
ocesses,
534

14.
5.1Cal
cul
ati
onofFor
ecast
sfr
om ARMADi
ff
erenceEquat
ion,
534

14.
5.2For
ecast
sfr
om I
nfi
nit
eVMAFor
m andPr
oper
ti
esofFor
ecast
Er
ror
s,536

14.
6St
ate-
SpaceFor
m oft
heVARMAModel
,536

14.
7Fur
therDi
scussi
onofVARMAModel
Speci
fi
cat
ion,
539

14.
7.1Kr
oneckerSt
ruct
uref
orVARMAModel
s,539

14.
7.2AnEmpi
ri
cal
Exampl
e,543

14.
7.3Par
ti
alCanoni
cal
Cor
rel
ati
onAnal
ysi
sforReduced-
Rank

St
ruct
ure,
545

14.
8Nonst
ati
onar
it
yandCoi
ntegr
ati
on,
546

14.
8.1Vect
orARI
MAModel
s,546

14.
8.2Coi
ntegr
ati
oni
nNonst
ati
onar
yVect
orPr
ocesses,
547

14.
8.3Est
imat
ionandI
nfer
encesf
orCoi
ntegr
atedVARModel
s,549

Appendi
xA14.
1Spect
ral
Char
act
eri
sti
csandLi
nearFi
l
ter
ingRel
ati
onsf
or
St
ati
onar
yMul
ti
var
iat
ePr
ocesses,
552

A14.
1.1Spect
ral
Char
act
eri
sti
csf
orSt
ati
onar
yMul
ti
var
iat
e

Pr
ocesses,
552

A14.
1.2Li
nearFi
l
ter
ingRel
ati
onsf
orSt
ati
onar
yMul
ti
var
iat
e

Pr
ocesses,
553

Exer
cises,
554

PARTFOURDESI
GNOFDI
SCRETECONTROLSCHEMES559

15Aspect
sofPr
ocessCont
rol
561

15.
1Pr
ocessMoni
tor
ingandPr
ocessAdj
ust
ment
,562

15.
1.1Pr
ocessMoni
tor
ing,
562

15.
1.2Pr
ocessAdj
ust
ment
,564

15.
2Pr
ocessAdj
ust
mentUsi
ngFeedbackCont
rol
,566

15.
2.1FeedbackAdj
ust
mentChar
t,567
15.
2.2Model
i
ngt
heFeedbackLoop,
569

15.
2.3Si
mpl
eModel
sforDi
stur
bancesandDy
nami
cs,
570

15.
2.4Gener
alMi
nimum MeanSquar
eEr
rorFeedbackCont
rol

Schemes,
573

15.
2.5Manual
Adj
ust
mentf
orDi
scr
etePr
opor
ti
onal
--
Int
egr
al

Schemes,
575

15.
2.6Compl
ement
aryRol
esofMoni
tor
ingandAdj
ust
ment
,578

15.
3Excessi
veAdj
ust
mentSomet
imesRequi
redbyMMSECont
rol
,580

15.
3.1Const
rai
nedCont
rol
,581

15.
4Mi
nimum CostCont
rol
wit
hFi
xedCost
sofAdj
ust
mentand

Moni
tor
ing,
582

15.
4.1BoundedAdj
ust
mentSchemef
orFi
xedAdj
ust
mentCost
,583

15.
4.2I
ndi
rectAppr
oachf
orObt
aini
ngaBoundedAdj
ust
ment
Scheme,
584

15.
4.3I
ncl
usi
onoft
heCostofMoni
tor
ing,
585

15.
5Feedf
orwar
dCont
rol
,588

15.
5.1Feedf
orwar
dCont
rol
toMi
nimi
zeMeanSquar
eEr
roratt
he

Out
put
,588

15.
5.2AnExampl
e:Cont
rol
oft
heSpeci
fi
cGr
avi
tyofanI
nter
medi
ate

Pr
oduct
,591

15.
5.3Feedf
orwar
dCont
rol
wit
hMul
ti
pleI
nput
s,593

15.
5.4Feedf
orwar
d--
FeedbackCont
rol
,594

15.
5.5Adv
ant
agesandDi
sadv
ant
agesofFeedf
orwar
dandFeedback

Cont
rol
,596

15.
5.6Remar
ksonFi
tt
ingTr
ansf
erFunct
ion-
-Noi
seModel
sUsi
ng
Oper
ati
ngDat
a,597

15.
6Moni
tor
ingVal
uesofPar
amet
ersofFor
ecast
ingandFeedback

Adj
ust
mentSchemes,
599

Appendi
xA15.
1FeedbackCont
rol
SchemesWher
etheAdj
ust
mentVar
iance

I
sRest
ri
cted,
600

A15.
1.1Der
ivat
ionofOpt
imal
Adj
ust
ment
,601

A15.
1.2CaseWher
e I
sNegl
i
gibl
e,603

Appendi
xA15.
2Choi
ceoft
heSampl
i
ngI
nter
val
,609

A15.
2.1I
ll
ust
rat
ionoft
heEf
fectofReduci
ngSampl
i
ngFr
equency
,610

A15.
2.2Sampl
i
nganI
MA(
0,1,
1)Pr
ocess,
610

Exer
cises,
613

PARTFI
VECHARTSANDTABLES617

COLLECTI
ONOFTABLESANDCHARTS619
COLLECTI
ONOFTI
MESERI
ESUSEDFOREXAMPLESI
NTHE

TEXTANDI
NEXERCI
SES625

REFERENCES642

I
NDEX