Comparative Evaluation of Forecast Accuracies for ARIMA, Exponential Smoothing and VAR

Hatice Erkekoglu, Aweng Peter Majok Garang and Adire Simon Deng
Additional contact information
Hatice Erkekoglu: Faculty of Applied Sciences, Kayseri University, Kayseri, Turkey
Aweng Peter Majok Garang: Faculty of Economics and Administrative Sciences, Erciyes University, Kayseri, Turkey,
Adire Simon Deng: Department of Accounting and Finance, Moi University, Kenya.

International Journal of Economics and Financial Issues, 2020, vol. 10, issue 6, 206-216

Abstract: While various linear and nonlinear forecasting models exist, multivariate methods like VAR, Exponential smoothing, and Box-Jenkins ARIMA methodology constitute the widely used methods in time series. This paper employs series of Turkish private consumption, exports and GDP data ranging between 1998: Q1 and 2017: Q4 to analyze the forecast performance of the three models using measures of accuracy such as RMSE, MAE, MAPE, Theil s U1 and U2. Seasonal decomposition and ADF unit root tests were performed to obtain new deseasonalized series and stationarity, respectively. Results offer preference for the use of ARIMA in forecasting, having performed better than VAR and exponential smoothing in all scenarios. Additionally, VAR model provided better forecast accuracy than exponential smoothing on all measures of accuracy except on Thiel s U2 whose VAR values were not computed. Cautionary use of ARIMA for forecasting is recommended.

Keywords: Forecast Evaluation; ARIMA; Exponential Smoothing; VAR (search for similar items in EconPapers)
JEL-codes: C1 C51 E00 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econjournals.com/index.php/ijefi/article/download/9020/pdf (application/pdf)
https://www.econjournals.com/index.php/ijefi/article/view/9020/pdf (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2020-06-24

Access Statistics for this article

International Journal of Economics and Financial Issues is currently edited by Ilhan Ozturk

More articles in International Journal of Economics and Financial Issues from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().