What does the Autocorrelation vs Lag Plot (Correlogram) tell us?
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1. Context
In this video, we take a look at the information provided by the plot of Autocorrelation vs Lag (also called Correlogram). Such a plot provides a very handy visual tool to detect the type of process / specification followed by the time series. We take a look at three correlograms and using simple rules of thumb we figure out the candidate process behind each of them. The processes touched upon are: Moving Average (MA) process, Auto Regressive (AR) process, Auto Regressive Moving Average (ARMA) process. For more information about the FRM Part 1 preparation course, please visit the course page.
| Area | Quantitative Analysis |
| Reading | Stationary Time Series |
| Reference | Chapter 10. Stationary Time Series In Book 2, GARP Official Books. |