This will happen if the drift term in the ARIMA is zero. Suppose we
call the AR coefficient "rho". Then ten periods out the forecast of
the change in the stock price is rho^10 times the current change in
the stock price. Since probably have a small rho, rho^10 is
approximately zero.
-Dick Startz
On 10 Apr 2001 19:07:36 GMT, Matt Kaar <[EMAIL PROTECTED]>
wrote:
>I have a question that probably applies to ARIMA forecasting in general,
>but the specific piece of econometrics software I'm using is EViews.
>
>When I use an ARIMA(1,1,0) model to model ~150 pieces of stock market
>data and then use the EViews software to forecast the next 100 values,
>Every forecast after about the sixth forecasted value is the same to
>around 10 significant figures.
>
>My question is: Why is this happening? My professor said that ARIMA(1,1,0)
>should be able to forecast varying values way past the sixth value.
>
>Thanks,
>Matt
----------------------
Richard Startz [EMAIL PROTECTED]
Lundberg Startz Associates
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