BSE 500 FORECAST

Correlogram of Raw Dataset:Its quiet evident from the correlogram that the autocorrelation exist since the ACF & PCF values are continuously
decreasing. Note that the dot lines in the graphs of AC and PAC are the approximate two standard error bounds computed
as 2/sqr(T).Hence the null hypothesis that there is autocorrelation is getting accepted throughout.
Date: 07/24/12 Time: 00:46
Sample: 7/23/2001 7/23/2012
Included observations: 2747
Autocorrelation
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Partial Correlation
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10
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18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

AC

PAC

0.999
0.998
0.996
0.995
0.994
0.993
0.992
0.990
0.989
0.988
0.987
0.985
0.984
0.983
0.981
0.980
0.978
0.977
0.976
0.974
0.973
0.971
0.970
0.969
0.967
0.966
0.964
0.963
0.962
0.960
0.959
0.958
0.956
0.955
0.954
0.952

0.999
-0.068
-0.015
0.003
0.015
0.019
0.010
-0.026
-0.034
-0.013
0.001
0.021
-0.014
-0.008
-0.032
-0.012
-0.014
-0.010
0.008
0.011
0.014
-0.005
0.002
0.011
-0.007
-0.011
-0.008
0.031
-0.013
0.004
0.011
0.009
-0.003
-0.000
-0.007
0.015

Q-Stat
2744.1
5482.5
8215.0
10942.
13663.
16378.
19088.
21793.
24491.
27184.
29870.
32550.
35225.
37893.
40555.
43210.
45858.
48499.
51134.
53761.
56383.
58997.
61606.
64207.
66803.
69391.
71973.
74549.
77118.
79681.
82238.
84789.
87333.
89871.
92404.
94930.

Prob
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

Correlogram of IR(1) :
Date: 07/24/12 Time: 00:56
Sample: 7/23/2001 7/23/2012

The AR order from PCF is (1) & the MA

order from the ACF is of order (1).
Included observations: 2746
Autocorrelation
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Partial Correlation
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26
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28
29
30
31
32
33
34
35
36

AC

PAC

0.117
0.029
-0.001
-0.027
-0.043
-0.032
0.041
0.061
0.033
0.015
-0.054
0.013
0.016
0.063
0.034
0.041
0.046
-0.020
-0.029
-0.033
0.001
-0.002
-0.009
0.020
0.028
0.003
-0.054
0.002
-0.006
-0.015
-0.026
0.005
0.009
0.029
-0.039
0.026

0.117
0.016
-0.006
-0.027
-0.037
-0.022
0.050
0.053
0.016
0.004
-0.059
0.031
0.022
0.064
0.015
0.025
0.033
-0.023
-0.015
-0.022
0.007
-0.011
-0.015
0.011
0.024
-0.004
-0.052
0.016
-0.011
-0.016
-0.031
0.009
0.004
0.033
-0.040
0.040

Q-Stat
37.546
39.873
39.875
41.891
47.034
49.829
54.552
64.970
67.991
68.650
76.709
77.183
77.857
88.944
92.152
96.878
102.74
103.85
106.15
109.13
109.13
109.15
109.39
110.48
112.58
112.60
120.61
120.63
120.73
121.38
123.25
123.33
123.55
125.86
130.03
131.96

Prob
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000

Parameter estimates of MA(1) model :

Dependent Variable: DCLOSE
Method: Least Squares
Date: 07/24/12 Time: 01:12
Sample (adjusted): 7/24/2001 7/23/2012
Included observations: 2746 after adjustments
Convergence achieved after 5 iterations
MA Backcast: 7/23/2001
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
MA(1)

2.000176
0.111984

1.598992
0.018976

1.250898
5.901340

0.2111
0.0000

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.013082
0.012723
75.35521
15581549
-15764.20
36.37376
0.000000

Inverted MA Roots

-.11

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

2.004782
75.83919
11.48303
11.48734
11.48459
1.992840

200

Forecast: DCLOSEF
Actual: DCLOSE
Forecast sample: 7/23/2001 7/23/2012
Included observations: 2746
Root Mean Squared Error 75.79757
Mean Absolute Error
47.71814
Mean Abs. Percent Error 125.6167
Theil Inequality Coefficient 0.963230
Bias Proportion
0.000000
Variance Proportion
0.947273
Covariance Proportion 0.052727

100

-100

-200

-300
02

04

06
DCLOSEF

08
2 S.E.

10

12

Parameter estimates of AR(1) MA(1) model :

Dependent Variable: DCLOSE
Method: Least Squares
Date: 07/24/12 Time: 01:13
Sample (adjusted): 7/25/2001 7/23/2012
Included observations: 2745 after adjustments
Convergence achieved after 11 iterations
MA Backcast: 7/24/2001
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
AR(1)
MA(1)

2.005477
0.226005
-0.110417

1.653074
0.156899
0.160079

1.213181
1.440449
-0.689767

0.2252
0.1499
0.4904

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.013877
0.013158
75.35195
15568847
-15757.84
19.29302
0.000000

Inverted AR Roots
Inverted MA Roots

.23
.11

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

2.009362
75.85263
11.48331
11.48978
11.48565
2.000007

160

Forecast: DCLOSEF
Actual: DCLOSE
Forecast sample: 7/23/2001 7/23/2012
Adjusted sample: 7/25/2001 7/23/2012
Included observations: 2745
Root Mean Squared Error 75.83856
Mean Absolute Error
47.76835
Mean Abs. Percent Error 125.7223
Theil Inequality Coefficient 0.973908
Bias Proportion
0.000000
Variance Proportion
0.998448
Covariance Proportion 0.001552

120
80
40
0
-40
-80
-120
-160
02

04

06
DCLOSEF

08
2 S.E.

10

12

Parameter estimates of AR(1) model :

Dependent Variable: DCLOSE
Method: Least Squares
Date: 07/24/12 Time: 01:11
Sample (adjusted): 7/25/2001 7/23/2012
Included observations: 2745 after adjustments
Convergence achieved after 3 iterations
Variable

Coefficient

Std. Error

t-Statistic

Prob.

C
AR(1)

2.004777
0.116954

1.628571
0.018969

1.231004
6.165358

0.2184
0.0000

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)

0.013668
0.013309
75.34619
15572142
-15758.13
38.01164
0.000000

Inverted AR Roots

.12

Mean dependent var

S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat

2.009362
75.85263
11.48279
11.48710
11.48435
2.002984

160

Forecast: DCLOSEF
Actual: DCLOSE
Forecast sample: 7/23/2001 7/23/2012
Adjusted sample: 7/25/2001 7/23/2012
Included observations: 2745
Root Mean Squared Error 75.83869
Mean Absolute Error
47.76919
Mean Abs. Percent Error 125.7215
Theil Inequality Coefficient 0.973917
Bias Proportion
0.000000
Variance Proportion
0.999258
Covariance Proportion 0.000742

120
80
40
0
-40
-80
-120
-160
02

04

06
DCLOSEF

08
2 S.E.

10

12

ComparativeTable for Various Criterion :

AIC
SIC
Adj R2
Inverse AR Roots
Inverse MA Roots
Mean Absolute %
Error

AR(1)
11.48279
11.4871
0.013309
0.12
-----------

MA(1)
11.48303
11.48734
0.012723
-----------0.11

ARIMA(1,1,1)
11.48331
11.48978
0.013158
0.23
0.11

125.7215

125.6167

125.7223

Hence based on the above criterion we select the AR(1,1,0) model as the best fit model for the given data set.
The same can be validated by AUTO ARIMA CRITERION OUTPUT which also suggest as AR(1,1,0) model as the best fit
model.

AR / MA
0.000000
1.000000
2.000000

0.000000
11.49798
11.48710
11.49009

1.000000
11.48770
11.48978
11.49297

2.000000
11.48973
11.49259
11.48906

3.000000
11.49257
11.49541
11.49026

The proposed model equation of AR(1) :-

Yt (Close Price) = 2.004777 + 0.116954 Yt-1(DClose_Price)