Lesson 13: Fractional Differencing and Threshold Models

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Assignments:

  • Read Sections 5.2 and 5.5 of your text.
  • Read through the Lesson 13 online notes that follow.
  • Complete Lesson 13 Assignment.

Overview:

This week we'll look at two variations of ARIMA models - long memory models (fractional differences) and threshold models (regime switching models).

Learning Objectives:

After successfully completing this lesson, you should be able to:

  • Identify and interpret simple fractionally differenced models
  • Recognize when to take first differences vs. fractional differences
  • Identify and interpret ARFIMA models
  • Apply different models within two intervals of a time series