FORECASTING NONNORMAL TIME-SERIES

We look at the problem of forecasting time series which are not normally distributed. An overall approach is suggested which works both on simulated data and on real data sets. The idea is intuitively attractive and has the considerable advantage that it can readily be understood by non‐specialists. Our approach is based on ARMA methodology and our models are estimated via a likelihood procedure which takes into account the non‐normality of the data. We examine in some detail the circumstances in which taking explicit account of the nonnormality improves the forecasting process in a significant way. Results from several simulated and real series are included. Copyright © 1991 John Wiley & Sons, Ltd.