ABSTRACT
This chapter starts with principles based on information criteria. It moves to selecting explanatory variables and finish with topics related to the combination of models. This selection procedure can be combined with other selection techniques for different elements of the ADAM discussed in the following sections of the chapter. The components selection in ETS is based on information criteria. There are different approaches for automatic variable selection, but not all of them are efficient in the context of dynamic models. Furthermore, the model selected on one sample might differ from the model chosen for the same sample but with one more observation. The point forecast (conditional mean) continues the trajectory observed on the last several observations, just before the forecast origin. The future values are inside the prediction interval, so overall, this can be considered a reasonable forecast.
