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Practical Time Series Analysis by Dr. PKS Prakash, Dr. Avishek Pal

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Confidence interval

One of the commonly asked questions in forecasting is, What is the confidence interval for estimates? The confidence level in a forecasting model is defined by the alpha parameter in the forecast function. The alpha value 0.05 represents an estimate with 95% confidence, which can be interpreted as the estimates returned by the model have 5% probability of not falling in the defined distribution range. The confidence interval is evaluated as follows:

Here, Zα is the critical value defined based on alpha. For the alpha value 0.05, the critical value is 1.96. The confidence interval with an alpha value 0.05 for the DJIA dataset ...

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