Archives: Terms

Definition of Avoidable Cost Avoidable cost refers to the expenses that a company can eliminate if it decides not to undertake a certain project or business activity. These costs are directly associated with specific activities and can be avoided if those activities are discontinued. Avoidable costs contrast with sunk costs, […]

Definition of the Averch-Johnson Effect The Averch-Johnson effect is a theory in economics that describes how government-imposed regulations on the rate of return for utility companies can lead to inefficiencies in capital allocation. Specifically, it suggests that when regulatory bodies set a maximum rate of return that these companies can […]

Definition of Autoregressive Process An Autoregressive (AR) process is a type of statistical model used in analyzing time-series data, where the current value of the series is based on the values of previous periods plus a stochastic (random) error term. This model is widely used for forecasting in fields such […]

Definition of Autoregressive Moving Average (ARMA) Model An Autoregressive Moving Average (ARMA) model is a class of statistical models used for analyzing and predicting time series data. It combines two parts: an autoregressive (AR) part and a moving average (MA) part. The AR part involves regressing the variable on its […]

Definition of Autoregressive Integrated Moving Average (ARIMA) Model An Autoregressive Integrated Moving Average (ARIMA) model is a class of statistical models for analyzing and forecasting time series data. It combines elements of autoregression (AR), differencing (I), and moving average (MA) to model diverse time series data, including non-stationary series. This […]

Definition of Autoregressive Conditional Heteroscedasticity (ARCH) Model The Autoregressive Conditional Heteroscedasticity (ARCH) model is a statistical tool used by economists and financial analysts to analyze and predict the volatility of time series data, especially for financial returns. The term “heteroscedasticity” refers to the characteristic of a variable’s volatility being variable […]

Definition of Autonomous Investment Autonomous investment refers to expenditures on capital goods that are not influenced by the current level of national income or economic production. This type of investment is driven primarily by technological progress and innovations, policy decisions, and other factors unrelated to the business cycle or current […]

Definition of Automation Automation refers to the technology by which a process or procedure is performed with minimal human assistance. It involves the use of various control systems for operating equipment such as machinery, processes in factories, aircraft, and other applications with reduced direct human intervention. The primary aim of […]

Definition of Automated Econometrics Automated econometrics refers to the application of computer algorithms and software to perform econometric analysis, which encompasses statistical and mathematical methods used in economics to empirically test hypotheses and estimate economic relationships. This field leverages automation to handle complex, large-scale data analyses that would be impractical […]

Definition of Autocovariance Function The autocovariance function measures the covariance of a time series with a lagged version of itself over different intervals of time. It is a fundamental tool used in time series analysis to understand the variability and predictability of a series over time. Essentially, it tells us […]