Integer-valued autoregressive models for counts showing underdispersion

Abstract

The Poisson distribution is a simple and popular model for count-data random variables, but it suffers from the equidispersion requirement, which is often not met in practice. While models for overdispersed counts have been discussed intensively in the literature, the opposite phenomenon, underdispersion, has received only little attention, especially in a time series context. We start with a detailed survey of distribution models allowing for underdispersion, discuss their properties and highlight possible disadvantages. After having identified two model families with attractive properties as well as only two model parameters, we combine these models with the INAR(1) model (integer-valued autoregressive), which is particularly well suited to obtain auotocorrelated counts with underdispersion. Properties of the resulting stationary INAR(1) models and approaches for parameter estimation are considered, as well as possible extensions to higher order autoregressions. Three real-data examples illustrate the application of the models in practice.