A COMPANION TO Theoretical Econometrics

Time Series and Dynamic Models

Aris Spanos

1 Introduction

This chapter discusses certain dynamic statistical models of interest in model­ing time series data. Particular emphasis is placed on the problem of statistical adequacy: the postulated model does not exhibit departures from the underlying assumptions. Statistical models are specified in terms of probabilistic assump­tions on the observable stochastic processes involved, which can often be as­sessed a priori using graphical techniques. The primary objective is to render empirical modeling of time series an informed systematic procedure that gives rise to reliable empirical evidence.