Moving average model
A moving average model (MA) is a linear combination of historic white noise error terms. Let's have a look at the equation of the model:
![](https://static.packt-cdn.com/products/9781788830577/graphics/0baad1db-33e4-4867-95ad-04841687e320.png)
![](https://static.packt-cdn.com/products/9781788830577/graphics/de3ecd08-ee5e-4a98-9ca3-84eac6bc30d1.png)
Here, ω is the white noise with E(ωt)=0 and variance = σ2.
In order to find out the order of the AR model, we need to plot a partial autocorrelation function plot, and then look for the lag where the upper confidence level has been crossed for the first time.