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614
3 AUTHORS, INCLUDING:
Spyros Makridakis
Rob J Hyndman
Neapolis University
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345
Book Reviews
346
pictures.And severaltimes(e.g.,p.
explainedthroughwordsthanthrough
238), he plots a historicaltimeseriesand forecaston one figure,followed
immediately
by an absolutelyidenticalfigurebutwiththeinclusionof the
realizationsplottednextto the forecasts.These could have all been collapsed to one figure.DB does includea disk containingall of thedata for
the examplesin thebook.
MWH is a comprehensiveoverviewof the fieldof practicalbusiness
forecasting.As this book is in its thirdedition,most typos have been
eliminated,and theflowis well designedfora textbook.Like DB, it provides data,butin theformof a web siteinsteadof a disk.There are some
minorflaws,butnothingthatwouldproveespeciallyproblematicfora student.Most mistakesare confinedto usingtermswithoutexplanation(e.g.,
althoughtheirpurpose
on p. 280, Cp and AIC are used withoutdefinition,
d
is clear, and on p. 210, = is includedwithno explanation).Something
thatdoes not actuallyqualifyas a problemis the chapteron long-range
insights,mainlysuggestingthat
forecasting.
MWH offerssome interesting
forthelong
the"usual" methodologiesdo notworkwell whenforecasting
term.It is interesting
thatlong-rangetime series data are just data, so
thatthestandardmethodologiesshouldwork.(Afterall, an ARMA model
cannot"sense" thetimeperiodsinvolved.)Why theydo not,of course,is
thatthestandardassumptions(like stationarity)
are no longervalid forthe
longterm.This shouldemphasizeto thestudentthatall timeseriesmodels
are only approximations
and not explanatorymodels. It shouldalso give
the studentpause when applyingshort-term
models,suggestingthatthe
resultsare notnecessarilyto be trusted.Perhapslost on thestudentis that
most long-rangeforecastsare pure speculation(includingsome curious
forecastsprovidedby MWH itselfon pp. 474-476). Anyonedoubtingthis
shouldtake noteof WilliamSherden'snew book (Sherden1998) reviewwhicharguesthatmostbusiness
ing thebusinessof economicforecasting,
and economicforecastsare of littleor no value.
To continuethe discussionof long-rangeforecasts,MWH includes a
thatprovidesan exceland adjustments
chapteron judgmentalforecasting
forecasts.
lentreviewof all thatcan go wrongwhenhumanbiases influence
earlier,MWH includesan entirechapteron resultsfrom
And,as mentioned
Not much surprising
M competitions.
here,but thisis a greatchapterto
enable a studentto put all previouslylearnedtheoryintoperspective.The
studentmay be shocked to learn thatthe more complex methods(like
ARIMA models) are oftenoutperformed
by simplemodels (like smoothis well aware
that,althoughtheresearchcommunity
ing). It is fascinating
of thesefacts,thishas notsloweddowntheeffort
expendedbuildingnewer
is imand morecomplexmodels withno real evidencethatperformance
proving.
MWH does notdevotemuchmaterialto unitroottests,whichis surprising consideringtheinordinateamountof timeand researchthateconometriciansdevoteto thistopic.MWH does a nicejob buildingand explaining
in simplelanguagethecompleteseasonal ARIMA model,a techniquethat
will surelyfindpracticaluse.
Overall,Forecasting:Methodsand Applicationsis a maturetextwith
techniques,containsa good
thoroughcoverageof essentialand important
mix of problemsets, and should serve well as a textbook.Elementsof
because of the new ideas in graphics
Forecastingis novel and interesting
and practicaladvice thatit presents.
mostbooks considerthese
havebegunto covertheseissues.Unfortunately,
As researchon unitroottestsand cointegration
reaches
issues onlybriefly.
maturity,
books devotedexclusivelyto these two topics are now being
published.TimeSeries, UnitRoots, atndCointegrationis one such book
thanunitroottests).
(withmoreemphasison cointegration
Otherbooks cover unitroots and cointegration
extensively(Hamilton
1994; Reinsel 1997). One of the distinctivefeaturesof Dhrymes' book
is its emphasison theoreticaldevelopmentand probabilisticfoundations.
In its theoreticaldevelopment,Dhrymesfocuses on a narrowerclass of
nonstationary
models. For example,unitroot testsfocus mainlyon the
concentrateson vectorautoregrescase of iid errors,and cointegration
sions and integratedmovingaverages.However,the in-depthdiscussion
of a narrowlyfocusedclass of models makes it easier to understandthe
fundamentalsof these two topics. It also helps preparereadersfor the
studyof a widerclass of models,includingthose withdependenterrors.
and theoreticalaspects of
If one wantsa book withsound fundamentals
and unitroottests,thisis thatbook.
cointegration
to time series, estimation,and
Dhrymesbegins with an introduction
prediction.These topics are preliminaryto cointegrationand unit root
processes.Unitrootprocessesand relatedasymptoticpropertiesare then
bepresentedin a systematicmannerin Chapter3 by makinga distinction
tweentrueand operationalmodels,especiallyinvolvinga constantterm.
is thoroughfor the case of iid errors,some disAlthoughthe treatment
cussion about autocorrelatederrorswould be desirable.Various aspects
are discussed in the next threechapters,whichpresent
of cointegration
Constrained
rigorouscharacterization
and implicationsof cointegration.
vectorsbased on workof Ahn and Reinsel
estimationof thecointegrating
(1990) and Johansen(1988) is discussed,and a connectionto canonical
test for cointegration
variablesis made. A conformity
based on an unProbabilitytopics such as
constrainedestimatoris discussedextensively.
and invarianceprinciplesare esBrownianmotion,stochasticintegration,
and unit root processes. The last
sential to understanding
cointegration
threechaptersprovidea good overviewof these topics and containmaand unitroot processes. These chapters
terialpertinentto cointegration
come in handyreadingChapters3-6.
It is worthcomparingDhrymes'book to the recentbooks by Hamilton(1994) and Reinsel (1997), whichalso covercointegration
extensively.
Hamiltonprovidesa "grocerystore" of time series analysis,coveringa
vast rangeof topicswithbreadth,whereasReinsel centerson analysisof
comtimeseries.Tine Series, UnitRoots,and Cointegration
multivariate
plementsthese two books, and vice versa. As notedin the Preface,this
book can be used as a secondarytextbookor a referencein an advanced
graduate-leveltimeseries or econometricscourse. It can also be used as
This book
a primarytextbookin a courseon unitrootsand cointegration.
shouldbe includedin a requiredreadinglist for those who studymultivariatetimeseriesor econometrics.
Sung K. AHN
State University
Washington
REFERENCES
WilliamM. BRIGGS
Cornell University Ahn, S. K., and Reinsel,G. C. (1990), "Estimationfor PartiallyNonstaModels," Journalof theAmerican
tionaryMultivariateAutoregressive
StatisticalAssociation,85, 813-823.
REFERENCE
of theEstimatesfor
Dickey,D. A., and Fuller,W. A. (1979), "Distribution
Sherden,W. A. (1998), The FortuneSellers: The Big Business of Buying
Time Series Witha UnitRoot,"JournaloftheAmerican
Autoregressive
and SellingPredictions,New York:Wiley.
StatisticalAssociation,74, 427-431.
Time Series
(1981), "LikelihoodRatio StatisticsforAutoregressive
Witha UnitRoot,"Econometrica,49, 1057-1072.
and ErrorCorEngle,R. F., and Granger,C. W. J. (1987), "Cointegration
Time Series, Unit Roots, and Cointegration.
rection:Representation,
Estimation,and Testing,"Economnetrica, 55,
251-276.
PhoebusDHRYMES. San Diego: Academic Press, 1997. ISBN 0-12Hamilton,J. D. (1994), Time Series Analysis,Princeton,NJ: Princeton
214695-6. xiv + 524 pp. $89.95.
UniversityPress.
Unit root tests and cointegrationhave been two of the most heavily Johansen,5. (1988), "StatisticalAnalysisof Cointegration
Vectors,"Jourresearchedtopicsin timeseriessincetheworkof Dickey and Fuller(1979,
nal ofEconomicDynamicsand Control,12,231-254.
1981) and Engle and Granger(1987). Because of theimportanceof these Reinsel,
G. C. (1997),ElementsofMultivariateTimeSeriesAnalysis,New
York: Springer-Verlag.
topics in theoryand practice,recenttimeseries and econometricsbooks