American Journal of Potato Research

https://doi.org/10.1007/s12230-020-09788-y

Potato Price Forecasting with Holt-Winters and ARIMA Methods: A

Case Study
Mehmet Arif Şahinli 1

# The Potato Association of America 2020

Abstract
In this paper, the first study using exponential smoothing methods and the Box-Jenkins method for forecasting consumer potato
prices in Turkey is conducted. The exponential smoothing methods include the Holt-Winters multiplicative (HWM) method and
the Holt-Winters additive (HWA) method. This study explores the application of the Holt-Winters approach to time series data of
consumer potato prices covering the period from January 1st, 2005 to July 31st, 2019. The data were obtained from the database
of the Turkish Statistical Institute. The paper explores and forecasts the trend of potato prices from August to December 2019.
The results illustrate that the ARIMA method achieves good consumer potato price forecasting accuracy according to the mean
absolute percentage error (MAPE), the root mean square error (RMSE) and the mean absolute deviation (MAD). As a result, the
forecasted values from August 2019 to December 2019 are calculated in this paper via these methods.

Resumen
En este artículo, se condujo el primer estudio utilizando métodos de suavización exponencial simple y de cuadro de Jenkins para
predecir los precios de la papa al consumidor en Turquía. Los métodos de suavización exponencial incluyen el de multiplicación
(HWM) y el aditivo de Holt-Winters (HWA). Este estudio explora la aplicación del enfoque de Holt-Winters a datos seriados en
el tiempo de precios de papa al consumidor, cubriendo el período de enero 1, 2005, a julio 31, 2019. Los datos se obtuvieron de la
base de datos del Instituto Turco de Estadística. El artículo explora y predice la tendencia de los precios de la papa de agosto a
diciembre de 2019. Los resultados ilustran que el método ARIMA logra buena precisión en la predicción del precio de la papa al
consumidor de acuerdo con la media del porcentaje absoluto del error (MAPE), la raíz del cuadrado medio del error (RMSE) y la
media de la desviación absoluta (MAD). Como resultado, se calculan los valores predichos de agosto de 2019 a diciembre de
2019 en este artículo por vía de estos métodos.

Keywords Exponential smoothing methods . Box-Jenkins method . Forecast accuracy . Potato prices . Turkey

Introduction
In 2018, the potato production in Turkey was estimated to be
4.550.493 metric tonnes. The domestic consumption of pota-
toes occurred through home meals and fast-food. The demand
and supply of potatoes relies on various factors such as polit-
ical, economic and environmental (meteorological) factors.
Moreover, the potato price in Turkey changes, especially be-
tween the fall and winter seasons, that is, its price exhibits
steady behaviors related to the trend and seasonal fluctuations.
* Mehmet Arif Şahinli
asahinli@ankara.edu.tr
1 Consumer prices are crucial elements of macroeconomic
Faculty of Agriculture, Department of Agricultural Economics,
Ankara University, 06110 Ankara, Turkey
For instance, in 2018, the potato production was lower than
that of the previous year (total production volume of
4.801.393 metric tonnes). Comparing the years 2017 and
2018, the production volume of potatoes decreased by
5.23%. Its consumer price ratio was up to 59.3% (Turkstat
2019).
Therefore, it is a significant crop, especially since it also
provides raw materials for the agricultural and food industries.
However, there is no effective organization in charge of the
production and marketing of potatoes in Turkey. The potato
price in Turkey is determined by the free market conditions
that depend on the supply. Because of this fact, potato pro-
ducers often face significant uncertainties related to the price
of their potato production (Erdal et al. 2009).
indicators because households in an economy follow these

indicators. The fluctuations in the potato price have a signifi-
cant effect not only on consumers but also on the food indus-
try. The Turkish government can play an important role in
trying to maintain stability in potato production and prices
by implementing suitable policies. Thus, an exact and accurate
forecasting strategy for potato prices and production via a
forecasting technique is necessary to assist the government’s
decision-making for subsequent months.
As recognized in present times, time series data analysis
has been an increasingly more important subject in various
research areas such as economics, agricultural economics,
econometrics, business, psychology, engineering, social sci-
ences and so on. This paper applies time series analysis to
assess the trend of the Republic of Turkey’s potato prices on
a monthly basis over the period from 2005 to 2019. The trend
analysis of potato prices over time is crucial due to the pro-
found influence this indicator has on agricultural commodity
prices. The aim of this paper is to forecast the trend of potato
prices for 2019, as well as analyze the results of the extrapo-
lated prices gained by using the Holt-Winters and Box-
Jenkins methods.
The Turkish Statistical Office’s (Turkstat) database was
used to obtain the data. The Holt-Winters smoothing method
was used as the time series method to analyze the forecast of
the trend of the consumer potato price variables during the
study period. The EViews 10 Econometrics package was used
for the research analysis. The forecasting analysis for potatoes
occurs for the period from January to December 2019.
The first part of this paper provides an overview of the
literature about potato price trends and their importance for a
Turkish agricultural sector. The second and third parts present
the research methodology used in the paper. The author ex-
plains the Holt-Winters smoothing method and emphasizes
the additive and multiplicative methods and Box-Jenkins
method. Finally, the last part contains the empirical results
of the conducted research.
Materials and Methods
The study particularly tested the Holt-Winters multiplicative
(HWM), the Holt-Winters additive (HWA) and Box-Jenkins
autoregressive moving average (ARIMA) methods. By using
these approaches, the major contributions of my paper are as
follows: a) to investigate the effects of the initial trend values
on forecasting accuracy and b) to find the best fit forecasting
results that are obtained by comparing these methods.
Input Data
In this study, the input data were taken from the Turkish
Statistical Institute database, and these data include consumer
price indexes (CPIs) and commodity prices. Observations
Am. J. Potato Res.
were taken from the monthly time series from January 1st,
2005 to July 31st, 2019; thus, the total number of observations
is n = 175.
Forecasting Methods
In recent times, forecasting methods have been steadily in-
creasingly used by researchers. Specifically, some popular
forecasting analysis methods are exponential smoothing
methods, the Box-Jenkins ARIMA model, the Grey forecast-
ing model and others. The ARIMA model has been imple-
mented in different areas, such as in different demand estima-
tions. The exponential smoothing methods have been applied
to estimating production, prices and other areas. That is, both
of them have been contributing to the field of forecasting.
These methods have their own strengths and weaknesses. In
this study, the potato prices are fitted with the Holt-Winters
Smoothing Method and the Box-Jenkins ARIMA modeling
approach and then the performances of these methods in fore-
casting the future values of the series are compared. This is
done because each of them has performed better at forecasting
compared to the other complicated approximations.
Moreover, these methods are relatively simple but robust ap-
proaches for forecasting data. The mentioned approaches are
introduced as follows.
Holt-Winters Smoothing Method
The Holt-Winters method was used to analyze this time series.
The following calculations and models were created using the
Eviews 10 Econometrics Package. There are different
methods used in time series analysis but this paper uses the
Holt-Winters smoothing method. If there are both trend and
seasonal patterns in data, the Seasonal Holt-Winters smooth-
ing method is used for forecasting the values.
In theory, the trend is defined in three ways: the first is
linear, the second is exponential and the last is damped. We
can define a linear trend as an increase or decrease by an equal
absolute amount from one period to another. An exponential
trend is an increase or decrease by an equal relative amount
from one period to another. A damped trend is defined as a
combination of linear and exponential trend behaviors.
Seasonality is explained as a repeating behavior, such as every
“Sth” period (Mladenović et al. 2016). Holt (2004), Kalekar
(2004), and Montgomery et al. (2008) mentioned that the
Holt-Winters methods can be used for forecasting time series
data that have both trend and seasonal patterns.
In theory, there are two models that are Holt-Winters
models: the multiplicative and additive models. The Holt-
Winters additive model (HWA) implies the kind of forecast
where an increase in the expected seasonal amount of a certain
phenomenon is added to the annual average. The Holt-
Winters multiplicative model (HWM) involves a relative
Am. J. Potato Res.
change of the analyzed variable that increases if the absolute
amount of this variable is greater, and the opposite also holds.
In additive models, the series show stable seasonal fluctua-
tions, notwithstanding a general level of time series trends.
For a multiplicative model, the seasonal fluctuation amount
varies depending on the general series level (Mladenović et al.
2016).
The HWA model is shown in eqs. (1) to (4). A seasonal
equation is added to Holt’s linear method equations:
level Lt ¼ αðyt −S t−s Þ þ ð1−αÞðLt−1 þ bt−1 Þ ð1Þ
trend bt ¼ βðLt −Lt−1 Þ þ ð1−β Þ−bt−1 ð2Þ
seasonal S t ¼ γ ðyt −Lt Þ þ ð1−γ ÞS t−s ð3Þ
forecast F tþk ¼ Lt þ kbt þ S tþk−s ð4Þ
where “s” is the length of the seasonal cycle, 0 ≤ α ≤ 1,
0 ≤ β ≤ 1 and 0 ≤ γ ≤ 1. Here, we must set the values of α, β
and γ. To choose the best values, we can use either the root
mean square error (RMSE) or the mean absolute percentage
error (MAPE).
Another alternative Holt-Winters model multiplies the
forecast via a seasonal factor. Its equations are given below:


yt
level Lt ¼ α þ ð1−αÞðLt−1 þ bt−1 Þ ð5Þ
S t−s
trend bt ¼ βðLt −Lt−1 Þ þ ð1−β Þ bt−1 ð6Þ
y cations, the ARIMA is used in time series analysis and fore-
seasonal S t ¼ γ t þ ð1−γ ÞS t−s ð7Þ
Lt
forecast F tþk ¼ ðLt þ kbt ÞS tþk−s ð8Þ
As mentioned above, “s” is the length of the seasonal cycle,
0 ≤ α ≤ 1, 0 ≤ β ≤ 1 and 0 ≤ γ ≤ 1. Here, the initial values for Lt
and bt are the same as those in the HWA model. However, the
initial seasonal estimates are different from those of the HWA
model and can be presented as follows: S t ¼ yt Lt .
First, we need the initial values for the level, trend
and seasonality. If we start with the seasonality, a com-
plete seasonal cycle such as y1, y2, …, ys is needed for
the analysis. If there is not a complete cycle, a forecast
cannot be made. In theory, it is best to start the trend
with two complete cycles in order to generate forecast
values. Equations (2) and (6) are the same formula for
the trend. The HWA and HWM methods’ initial values
are given below (Suppalakpanya et al. 2018).
The HWA method’s initial values are as follows:
Ln ¼ ðX 1 þ X 2 þ … þ X n Þ=n ð9Þ
S i ¼ X i −Ln ð10Þ
b1 ¼ ðX n −X 1 Þ=ðn−1Þ ð11Þ
b1 ¼ X 2 −X 1 ð12Þ
The HWM method’s initial values are as follows:
Ln ¼ ðX 1 þ X 2 þ … þ X n Þ=n ð13Þ
Xi
Si ¼ ð14Þ
Ln
b1 ¼ ðX n −X 1 Þ=ðn−1Þ ð15Þ
b1 ¼ X 2 −X 1 ð16Þ
b1 ¼ ½ðX 2 −X 1 Þ þ ðX 3 −X 2 Þ þ X 4 −X 3 =3 ð17Þ
b1 ¼ 0 ð18Þ
In this paper, the optimum values for all weighted factors
are automatically determined. The minimization of the
RMSE, MAPE and MAD is very important for determining
the optimal values of α, β and γ. Tratar and Srmenik (2016)
and Tratar et al. (2016) emphasized the computation of the
MAPE; thus, the minimization problem is solved by the re-
spective instrument using MS Office Excel. The HWA and
HWM methods’ equations and initial values are also illustrat-
ed in eqs. (1) to (18).
The Box-Jenkins Method
This methodology was implemented by Box and Jenkins in
1976 (Box and Jenkins 1976). As you can see, in many appli-
casting. The ARIMA abbreviation stands for autoregressive
integrated moving average model. If you apply this model to
your data, you transform the time series data to a stationary
state. When using this method, there are no missing data with-
in the time series data.
Maberly (1986) emphasizes the relationship between the
directions of intraday price changes. Wu and Zhang (1997)
stressed the predictability of the direction of change in future
exchange rates. These studies forecast the direction of change
in consumer price levels. Namely, we determine whether there
are future gains or losses using these forecasting methods.
The concepts of autoregressive (AR) and moving average
(MA) models were formulated by (Yule 1927; Walker 1931;
Slutsky 1937 and Yaglom 1955). Gooijer and Hyndman
(2006) emphasized the new developments in autoregressive
integrated moving average (ARIMA) models.
Methods of analyzing time series constitute an important
area of statistics. Although there are several objectives that can
be satisfied by analyzing a time series, they can all be classi-
fied as descriptive, explanatory, predictive, or control
(Bowerman and O’Connell 1987).
Kim (2003) found that bootstrap estimators make more
exact forecasts than the ordinary least squares estimators. He
applied AR models to small samples to conduct parameter
estimation and forecast the values. (Libert 1984; Poulos
 Am. J. Potato Res.

et al. 1987) used univariate ARIMA modeling to forecast
accurate parameter estimations.
A nonseasonal ARIMA model is classified as an
ARIMA(p,d,q) model, where we have the following:
& p is the number of autoregressive terms,
& d is the number of nonseasonal differences needed for
stationarity, and
& q is the number of lagged forecast errors in the prediction
equation.
The forecasting equation is constructed as follows. First, let
y denote the dth difference of Y, which means the following:
If d ¼ 0; yt ¼ Yt ð19Þ
If d ¼ 1; yt ¼ Yt −Yt−1 ð20Þ
If d ¼ 2; yt ¼ ðYt −Yt−1 Þ−ðYt−1 −Yt−2 Þ
¼ Yt −2Yt−1 þ Yt−2 ð21Þ
In terms of y, the general forecasting equation is as follows:
b
yt ¼ μ þ ϕ1 yt−1 þ … þ ϕp yt−p −θ1 et−1 −…−θq et−q ð22Þ
Here, the moving average parameters (θs) are defined so
that their signs are negative in the equation, following the
convention introduced by Box and Jenkins.
To identify the appropriate ARIMA model for Y, you be-
gin by determining the order of differencing (d) needed to
stationarize the series and remove the gross features of sea-
sonality, perhaps in conjunction with a variance-stabilizing
transformation such as logging or deflating. If you stop at this
point and predict that the differenced series is constant, you
have merely fitted a random walk or random trend model.
However, the stationarized series may still have autocorrelated
errors, suggesting that some number of AR terms (p ≥ 1) and/
or MA terms (q ≥ 1) are also needed in the forecasting equa-
tion (https://people.duke.edu/~rnau/411arim.htm, 2020).
The Box-Jenkins procedure will be used to analyze this
series.
Package Program The following calculations and models are
created using Eviews.
The Box–Jenkins forecasting methodology has four basic
steps.
40
Fig. 1 Descriptive statistics for
the monthly potato prices 30
In the first step, the autocorrelation function (ACF) and the
partial autocorrelation function (PACF) for the values of a
stationary time series are examined to determine the number
of autoregressive parameters (p) and the number of moving
average parameters (q). Then, an appropriate model is
selected.
In the second step, we use the data to estimate the identified
model’s parameters. In this literature, we use the ordinary least
squares to estimate the parameters of the selected model via
the Econometrics package.
In the third step, a diagnostic check procedure is imple-
mented using the Box-Jenkins modeling procedure. We check
whether all the parameter estimates have significant p values
and if the model contains as few parameters as possible. That
is, the residuals should be approximately normal.
The fourth step is to forecast the future time series values
by using the final model.
We can see the descriptive statistics in the following
Figure, including the results of the Jarque Bera test of normal-
ity. The residuals are normally distributed in this time series
such that we do reject the null hypothesis.
In conclusion, the forecasting algorithm proposed in
this paper is summarized in eqs. (1) to (22). The data
are the monthly potato consumer prices (175 months).
The forecasting methods are the HWA, HWM and Box-
Jenkins methods. In this paper, the initial values for the
level, trend and seasonal components are determined to
obtain optimal values.
Evaluation of the Models
There are some criteria to select the best model for making
forecasts, such as the mean absolute percentage error
(MAPE), root mean square error (RMSE) and mean absolute
deviation (MAD).
RMSE, MAPE and MAD Statistics
The accuracy of these models, including the Box-Jenkins
method and exponential smoothing method, might be de-
termined by using the test accuracy of the forecasting
models. To determine the accuracy of a forecasting mod-
el, you will use the size of the forecasting error. This
criterion is very applicable to the determination of the
accuracy of a forecasting model. If the prediction error
Series: PRICE
Sample 2005M01 2019M07
Observations 175

Mean 1.379665
Median 1.103100
Maximum 5.135500
20 Minimum 0.397000
Std. Dev. 0.808307
Skewness 1.826152
Kurtosis 6.924955
10

Jarque-Bera 209.5960
Probability 0.000000
0
0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Am. J. Potato Res.

PRICE
Fig. 2 The monthly potato prices 6

(kg/TL)* from January 2005 to

5
July 2019, kg: Kilogram; TL:
Turkish Lira 4

0
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

is a small value, the forecasted value produced by the where

model will be better.
Gentry et al. (1995), Alon et al. (2001), Chatfield (2001), t: time period,
Ravindran and Warsing (2013) used the MAPE as a perfor- T: total number of observations,
mance metric. The RMSE is commonly used in forecasting, yt: actual value, and.
climatology and regression analysis to verify experimental byt : forecasted value at time t.
results. In this paper, the RMSE metric was used as the pre-
diction error measure because it gives an accurate and exact
statistic for comparing forecasting methods (Barnston 1992)
emphasized the RMSE. There are some criteria to select the
best model for making forecasts such as the mean absolute Results and Discussion
percentage error (MAPE), root mean square error (RMSE)
and mean absolute deviation (MAD) (Ahmad and Ahmad Holt-Winters Smoothing Method Results
2013).
The first step in the process was to create a time series plot of
the data, which displayed the average monthly consumer po-
T  2
∑ yt −byt tato prices for each year for the years from 2005 to 2019
t¼1 (Fig. 1).
MSE ¼ ð23Þ
T In the following graphics, we can see the nonstationary
  shape of the time series. This series is going to be analyzed.
 y −by 
100  t T
t  This series randomly fluctuates, indicating the observation of
MAPE ¼ ∑   ð24Þ
T t¼0  yt  a global trend or seasonality. In particular, after the year 2005,
the time series quickly increases, and then the prices show the
behavior of up and down volatility (Fig. 2).
We note that the RMSE is calculated from the forecast
1 T  
 results from January 2006 to July 2019 (N = 163 months).
MAD ¼ ∑ yt −byt  ð25Þ
T t¼0 As observed from the raw data, the input data of the first years
from January 2005 to December 2005 are used to obtain the

Fig. 3 The comparison of the raw

data and the forecast data
determined by the HWA method
with Eqs. (1–4) for consumer
potato prices

Fig. 4 The comparison of the raw
data and the forecast data
determined by the HWM method
with Eqs. (5–8) for consumer
potato prices
initial values for the level, trend and seasonal components, as
shown in eqs. (9) to (18) for the HWA and HWM methods.
Figures 3 and 4 illustrate the comparison of the data for
consumer potato prices and the forecast data, which were de-
termined by the HWA method computed with Eqs. (1–4) and
the HWM method computed with Eqs. (5–8), respectively.
Figure 4 illustrates that the HWM method with Eqs. (5–8) is
the best case compared to the HWA method with Eqs. (1–4).
These results (as illustrated in Figs. 3 and 4) demonstrate
that the forecasted data values using the optimum solutions are
seamlessly closer to the raw potato price data. This is directly
in line with the RMSE results that assert that a small RMSE
represents a fit matching result.
The results in Table 1 show that forecasting consumer po-
tato prices using the HWA method gives the smallest RMSE
results. In this paper, the weighing factors that result in the
minimum RMSE were determined by Eviews. The forecasted
results for August 2019 to December 2019 were calculated by
the HWA and HWM methods. These different forecasted
values via these respective methods are also illustrated in
Table 1.
For the consumer potato prices, as indicated in Table 1, the
forecast data generated by these methods show the same trend.
The forecasted values of consumer potato prices calculated by
the HWA method were 1.47809, 1.41869, 1.35909, 1.39289
and 1.46809 for the months of August, September, October,
November and December 2019, respectively. Likewise, the
forecasted values of consumer potato prices of calculated by
the HWM method were 2.28960, 2.25265, 2.39486, 2.75285
Table 1 The optimal weighting factors and the forecast data for August 2019 to December 2019 using the HWA and HWM methods for consumer
potato prices
Methods Factors Forecasted prices (2019 year)
α β γ August
HWA 0.00911 1.00000 0.00000 1.47809
HWM 0.67333 0.07678 1.00000 2.28960
Am. J. Potato Res.
and 3.07948, respectively. These values show a slow increas-
ing trend.
The Box-Jenkins Method Results
The first step is to determine the trend in the potato prices. Due
to the trend value 0.7787 > 0.05, we can reject the null hy-
pothesis. Namely, there is no trend in the price value. The
second step in the process was to create a time series plot of
the data, which displayed the monthly average consumer po-
tato price for each year versus the years from 2005 to 2019.
The original data were transformed using the natural loga-
rithm in order to reduce the effect of outliers. For that reason,
we took the logarithms of these data. The monthly time series
were coded as;
Logprice: the natural logarithm of the consumer price index
of Turkey.
There are several stationary tests in the literature, and these
are graphical analyses, correlograms and unit root tests. In the
following graphics, we can see the nonstationary shape of the
time series. This series is going to be analyzed. This series
randomly fluctuates such that there is no global trend or sea-
sonality observed. Especially after 2005, the time series quick-
ly increases and, after that, this price has volatile up and down
behaviors (Fig. 5, Table 2).
After examining the graphical observations and the
correlogram evaluation, it is found that these data are first-
order integrated. To conduct a stationary test, we used the
Augmented Dickey Fuller (ADF) test since this test is the most
September October November December
1.41869 1.35909 1.39289 1.46809
2.25265 2.39486 2.75285 3.07948
Am. J. Potato Res.

Fig. 5 The monthly differences in DLPRICE

.6
the logarithmic potato prices (kg/
TL) from January 2005 to .4
July 2019
.2

.0

-.2

-.4

-.6
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

well-known in the literature. In econometrics, these test results Table 3 shows the results for the unit root test of the level
are easy to interpret and the test is quite efficient. This test is model. Once again, there is a unit root and LOGPRICE is
based on the following equation: nonstationary. In the first difference model, we reject this hy-
m
pothesis and conclude that D (LOGPRICE) does not have a
ΔY t ¼ β1 þ β2 t þ ðρ−1Þyt−1 þ ∑ αi ΔY t−i þ εt ð26Þ unit root. Namely, the time series are stationary, and similar
i¼1
results were found by the Phillips-Perron test. We denoted
where. DLOGPRICE as the first difference of LOGPRICE. In this
way, after differencing the LOGPRICE time series, we obtain
εt: pure white noise error term, and. stationary time series.
ΔYt − i: difference of Yt − i.

The Akaike information criterion (AIC) and the Schwarz or ARIMA(p,1,q) Model Selection for the Consumer Potato Prices
Bayesian information criterion (SBC) are used to determine the of Turkey (Two Important Criteria for Model Selection (AIC
time series lags. The ADF test (the τ statistic) determines the and BIC))
stationary of a time series. In our study, if there is a unit root,
namely, the null hypothesis is ρ = 1, we can conclude from this Akaike’s Information Criterion (AIC).
result that the time series is nonstationary. The alternative hy- 2 pþq
pothesis is ρ < 1, which means that the time series is stationary. If AIC ¼ logb
σ þ2 ð27Þ
n
ρ > 1, then the original time series will be explosive.

Table 2 Correlogram of DLPRICE

 Am. J. Potato Res.

Table 3 Unit root test results using Eviews

Null hypothesis Augmented Dickey-Fuller

Test for unit root in Level model Test for unit root in the 1st difference model

LOGPRICE has a unit root D (LOGPRICE) does not have a unit root

ADF p value* AIC SBC ADF p value* AIC SBC

Constant −0.393300 0.9063 0.126189 0.372930 −4.084526 0.0014 0.114950 0.342711

Constant and trend −2.621380 0.2715 0.087804 0.333525 −4.226107 0.0051 0.119478 0.366219
None 0.906438 0.9021 0.118592 0.346353 −3.907704 0.0001 0.111749 0.320529

*Critical values at the 5% level

Schwarz or Bayesian Information Criterion (BIC or SBC) Diagnostic Test for Residual Autocorrelation
2 pþq
BIC ¼ logb
σ þ2 logðnÞ ð28Þ The (Ljung and Box 1978) Q-statistic is an objective diagnos-
n tic measure of white noise for a time series, which assesses
Usually, the model with the smallest AIC or BIC values is whether there are patterns in a group of autocorrelations.
preferred. While the two criteria differ in their trade-off be- As you can see from above figure, the estimated residual
tween fit and parsimony, the BIC criterion is preferred be- time series is nearly white noise. Auto correlation and partial
cause it has the property that it will almost surely select the auto correlation give the impression that the residuals estimat-
true model. ed from ARIMA (1,1,2) are approximately white noise.
The AR and MA roots are inside the unit circle and the
stability condition is satisfied. However, all variables’ coeffi- Ho: ACFs are not significantly different from white noise
cients are not significant. ACFs (i.e., ACFs = 0).
Then, the metrics were estimated for the ARIMA (1,1,0), H1: ACFs are significantly different from white noise
ARIMA (4,1,0), ARIMA (0,1,1), ARIMA (0,1,4), ARIMA ACFs (i.e., ACFs ≠ 0).
(4,1,4), ARIMA (5,1,5), ARIMA (1,1,4) and ARIMA
(1,1,2). Additionally, the optimal lag length and information The formula for the Ljung-Box Q Statistic is given below:
criteria for the ARIMA (p,1,q) for DLOGPRICE are given in
k r2j k ½ACF ð J Þ2
the following Table 4. Q k ¼ T ð T þ 2Þ ∑ ¼ T ð T þ 2Þ ∑ ð29Þ
The results of the ARIMA (p,d,q) are not shown here since j¼1 T −j j¼1 T−j
their estimation reveals insignificant coefficients. Although
the marginal change is very small, the information criteria
favor the ARIMA (1,1,2) and its results are given below in Table 5 ARIMA (1,1,2) results
Table 5.
Variable Coefficient Std. error t-Statistic Prob.

C 0.007780 0.001440 5.401713 0.0000

Table 4 Optimal lag length AR(1) 0.810530 0.047911 16.91724 0.0000
MA(1) −0.531620 0.074177 −7.166910 0.0000
ARIMA (p,1,q) AIC SBC
MA(2) −0.456308 0.073328 −6.222829 0.0000
ARIMA (1,1,0) −1.398852 −1.362397 R-squared 0.191497 Mean dependent var 0.011013
ARIMA (4,1,0) −1.442746 −1.350517 Adjusted R-squared 0.177144 S.D. dependent var 0.124959
ARIMA (0,1,1) −1.436073 −1.399762 S.E. of regression 0.113352 Akaike info criterion −1.497788
ARIMA (0,1,4) −1.450466 −1.359688 Sum squared resid 2.171425 Schwarz criterion −1.420880
ARIMA (4,1,4) −1.458840 −1.292827 Log likelihood 133.2127 Hannan-Quinn criter. −1.464210
ARIMA (5,1,5) −1.497779 −1.294058 F-statistic 13.34272 Durbin-Watson stat 1.989548
ARIMA (1,1,4) −1.487842 −1.378479 Prob(F-statistic) 0.000000
ARIMA (1,1,2)* −1.497788 −1.420880 Inverted AR Roots .81
Inverted MA Roots .99 −.46
*Optimal lag length
Am. J. Potato Res.

Table 6 Correlogram of the residuals of the ARIMA (1,1,2) model with DLOGPRICE

This Qk is compared with the χ2 value. When Qk>χ2, the
null hypothesis is rejected; otherwise, it is not rejected and is
accepted. The Ljung-Box Statistics and their p values also
look good. The null hypothesis that there is no residual auto-
correlation is not rejected (Table 6).
Diagnostic Test for Normality of Residuals
In this study, we can improve the interpretation of the normal-
ity of the residuals. For that reason, in order to test the nor-
mality of the residuals, we make a Jarque-Bera (JB) normality
test, which gives us a goodness of fit measure for normality.
This test is based on the sample kurtosis (K) and skewness (S).
This test is defined, and the results are given below in Fig. 6.
According to these test results, the null hypothesis of the
Jarque-Bera (JB) test is rejected. This means that the null
hypothesis may indicate that there are a few outlying obser-
vations and the error process is not homoscedastic.
A good forecasting model should take into consideration
some characteristics. These determinants are given as follows.
First, the selected model fits the past data well. Second, the
plots of the actual data versus the fitted values are good, the
adjusted R2 is high, and the RMSE, MAPE and MAD are low
relative to other models, which is good. Third, the residuals
are white noise (Table 7).

RESID
Fig. 6 Statistics of the residuals .5
of the ARIMA (1,1,2) model with .4

DLOGPRICE .3

.2

.1

.0

-.1

-.2

-.3

-.4
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

35
Series: RESID
30 Sample 2005M01 2019M07
Observations 173
25
Mean 0.005702
20 Median -0.006565
Maximum 0.452262
15 Minimum -0.363693
Std. Dev. 0.112213
10 Skewness 0.698734
Kurtosis 5.329569
5
Jarque-Bera 53.19611
0 Probability 0.000000
-0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4

Table 7 The test accuracies of the forecasting models for the HWA, HWM and ARIMA methods for consumer potato prices
Methods The criteria chosen to select the best model for making forecasts
RMSE
HWA 1,204,450
HWM 0,279,400
ARIMA 0,201,759*
*ARIMA is the best model for making forecasts
Conclusions
In this research, we proposed and used different initial
values for the Holt-Winters method to forecast consumer
potato prices in Turkey, and the results are deeply evalu-
ated. The HWA and HWM methods were tested. During
these tests, different initial values were tried and applied
in the forecasting methods. The findings of this research
revealed that the results generated by the HWA method
had good accuracy for forecasting consumer potato prices.
To optimize the initial values, the RMSE was used in
practice. At the end, the forecasting results of the period
from August 2019 to December 2019 were also reported
in this research. In subsequent studies, other updated con-
sumer potato prices will be tested and evaluated using
other econometric and statistical forecasting techniques.
For a time series, it is necessary to identify the ARIMA
model, and thus we calculated and approximated different
ARIMA models. In our study, the logarithmized consumer
prices were taken as the first order difference. It is the best
way to select the ARIMA model. Some statistical tests were
evaluated according to the significance of the coefficients and
used to test the residuals. The Akaike information criterion
(AIC) and the Bayes information criterion (BIC) are used to
evaluate the fit of the ARIMA models. Both the R2 and
Adjusted R2 were evaluated. The best ARIMA model was
selected according to these criteria.
This study accomplished accurate forecasting for future
periods via the ARIMA model. The autocorrelation and partial
autocorrelation give the impression that the residuals estimat-
ed from the ARIMA (1,1,2) are approximately white noise.
There are some criteria to select the best model for making
forecasts such as the mean absolute percentage error (MAPE),
root mean square error (RMSE) and mean absolute deviation
(MAD). Comparing these criteria, the ARIMA (1,1,2) model
estimation is the best model in this study since all criteria
values for the ARIMA (1,1,2) model are the lowest.
We believe that the research methodology and the results
given in this paper can be useful for the strategy setting of
Turkish agricultural economists, economists and government
authorities.
Am. J. Potato Res.
MAPE MAD
234,4642 0,195,440
183,4870 1,427,065
116,9075* 0,176,896*
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