Discounted polynomials for multiple time series model building

Abstract

It is proposed to adopt Schmidt's (1974) modified polynomial lag models for multiple time series analysis. The resulting method can be regarded as a compromise between modelling pure autoregressive and autoregressive-moving average processes. While being as easy to specify and estimate as the former, the resulting class of models avoids some disadvantages that result from fitting pure autoregressive structures. As an example, data of Quenouille (1957) are analysed.