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ML Academy

Introduced on day 22

Ljung-Box test

A joint test that the first h autocorrelations of a series or of model residuals are zero, avoiding a bar-by-bar reading of the ACF.

In detail

The statistic sums squared autocorrelations weighted by the number of observations at each lag and is compared with a chi-square distribution; for ARMA residuals the degrees of freedom are reduced by the number of estimated AR and MA parameters. Common lag choices are 10 for non-seasonal and twice the period for seasonal data, capped at a fifth of the sample. It has little power on short series and cannot see regime changes after the sample.