1 Principles of statistical forecasting

• The main item refers not only to forecasting but any type of statistical modelling.
• It is that one builds the model one part (usually the majority) of the data, and then tests the results on the remainder.
• These sets are termed the Training and Testing sets.
• In standard statistical modelling, often the sets are sampled from the data at random.
• In time series forecasting, this is not possible, as the model building set has to have consecutive data, as does the testing set.
• This is further complicated with data that includes seasonality, as at least the training set has to contain multiples of the fundamental period.
• For instance, for hourly solar radiation, the training set would comprise a number of years. We also have to cater for leap years in some way. The easiest way is to delete Feb 29.