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The Basics of Autoregressive Models

Holger von Jouanne-Diedrich explains some of the principels of autoregressive models through a demonstration:

Well, this seems to be good news for the sales team: rising sales! Yet, how does this model arrive at those numbers? To understand what is going on we will now rebuild the model. Basically, everything is in the name already: auto-regressive, i.e. a (linear) regression on (a delayed copy of) itself (auto from Ancient Greek self)!

So, what we are going to do is create a delayed copy of the time series and run a linear regression on it. We will use the lm() function from base R for that (see also Learning Data Science: Modelling Basics).

Read on for some additional understanding.