Question

Tools of the Forecaster. Explain in-sample assessment of the goodness of a model and out-of-sample assessment of the forecasting ability of the model.

This question is asking to compare how an in-sample assessment can determine how good a model is or can be; and how an out-of-sample assessment can determine the forecasting ability of the model. Can you please elaborate on this?

Answer 1

Please find below the components of a time series: -

Trends: - Trend is an upward or downward shift in the time series based upon data over a period of time.

Seasonality: - Seasonality refers to regularly repeating patterns of highs and lows. This usually happens during seasons like Chirstmas or Easter, for instance.

Cycles: - Cyclical time series is encountered when we see rises and falls that are not of fixed period. One can think of cycles like in a business we have business cycles. Ideally the duration of such cycles is of 2 years.