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You are on page 1of 31

Anna Carlsund

Henrik Hult

Spring 2003

Peter J. Brockwell and Richard A. Davis, Introduction to Time Series and Forecasting, 2nd Edition, Springer New York, 2002.

We provide solutions to most of the problems in the book that are not computer

exercises. That is, you will not need a computer to solve these problems. We encourage students to come up with suggestions to improve the solutions and to report

any misprints that may be found.

Contents

Chapter 1

Chapter 2

Chapter 3

11

Chapter 4

14

Chapter 5

19

Chapter 6

6.5, 6.6

23

Chapter 7

7.1, 7.5

25

Chapter 8

28

Chapter 10

10.5

31

The indicator function

1A (h) =

Diracs delta function

+ if t = 0,

(t) =

0

if t =

6 0,

1

0

if h A,

if h

/ A.

and

f (t)(t)dt = f (0).

Chapter 1

Problem 1.1. a) First note that

E[(Y c)2 ] = E[Y 2 2Y c + c2 ] = E[Y 2 ] 2cE[Y ] + c2

= E[Y 2 ] 2c + c2 .

Find the extreme point by differentiating,

d

(E[Y 2 ] 2c + c2 ) = 2 + 2c = 0

dc

c = .

d

2

2

Since, dc

2 (E[Y ] 2c + c ) = 2 > 0 this is a min-point.

b) We have

= E[Y 2 | X] 2f (X)E[Y | X] + f 2 (X),

which is minimized by f (X) = E[Y | X] (take c = f (X) and = E[Y | X] in a).

c) We have

so the result follows from b).

Problem 1.4. a) For the mean we have

X (t) = E[a + bZt + cZt2 ] = a,

and for the autocovariance

X (t + h, t) = Cov(Xt+h , Xt ) = Cov(a + bZt+h + cZt+h2 , a + bZt + cZt2 )

= b2 Cov(Zt+h , Zt ) + bc Cov(Zt+h , Zt2 )

+ cb Cov(Zt+h2 , Zt ) + c2 Cov(Zt+h2 , Zt2 )

= 2 b2 1{0} (h) + 2 bc1{2} (h) + 2 cb1{2} (h) + 2 c2 1{0} (h)

2

(b + c2 ) 2 if h = 0,

bc 2

if |h| = 2,

=

0

otherwise.

Since X (t) and X (t + h, t) do not depend on t, {Xt : t Z} is (weakly) stationary.

b) For the mean we have

X (t) = E[Z1 ] cos(ct) + E[Z2 ] sin(ct) = 0,

and for the autocovariance

X (t + h, t) = Cov(Xt+h , Xt )

= Cov(Z1 cos(c(t + h)) + Z2 sin(c(t + h)), Z1 cos(ct) + Z2 sin(ct))

= cos(c(t + h)) cos(ct) Cov(Z1 , Z1 ) + cos(c(t + h)) sin(ct) Cov(Z1 , Z2 )

+ sin(c(t + h)) cos(ct) Cov(Z1 , Z2 ) + sin(c(t + h)) sin(ct) Cov(Z2 , Z2 )

= 2 (cos(c(t + h)) cos(ct) + sin(c(t + h)) sin(ct))

= 2 cos(ch)

where the last equality follows since cos( ) = cos cos + sin sin . Since

X (t) and X (t + h, t) do not depend on t, {Xt : t Z} is (weakly) stationary.

c) For the mean we have

X (t) = E[Zt ] cos(ct) + E[Zt1 ] sin(ct) = 0,

3

X (t + h, t) = Cov(Xt+h , Xt )

= Cov(Zt+h cos(c(t + h)) + Zt+h1 sin(c(t + h)), Zt cos(ct) + Zt1 sin(ct))

= cos(c(t + h)) cos(ct) Cov(Zt+h , Zt ) + cos(c(t + h)) sin(ct) Cov(Zt+h , Zt1 )

+ sin(c(t + h)) cos(ct) Cov(Zt+h1 , Zt )

+ sin(c(t + h)) sin(ct) Cov(Zt+h1 , Zt1 )

= 2 cos2 (ct)1{0} (h) + 2 cos(c(t 1)) sin(ct)1{1} (h)

+ 2 sin(c(t + 1)) cos(ct)1{1} (h) + 2 sin2 (ct)1{0} (h)

2

cos2 (ct) + 2 sin2 (ct) = 2 if h = 0,

=

2 cos(c(t 1)) sin(ct)

if h = 1,

2

cos(ct) sin(c(t + 1))

if h = 1,

We have that {Xt : t Z} is (weakly) stationary for c = k, k Z, since then

X (t + h, t) = 2 1{0} (h). For c 6= k, k Z, {Xt : t Z} is not (weakly)

stationary since X (t + h, t) depends on t.

d) For the mean we have

X (t) = E[a + bZ0 ] = a,

and for the autocovariance

X (t + h, t) = Cov(Xt+h , Xt ) = Cov(a + bZ0 , a + bZ0 ) = b2 Cov(Z0 , Z0 ) = 2 b2 .

Since X (t) and X (t + h, t) do not depend on t, {Xt : t Z} is (weakly) stationary.

e) If c = k, k Z then Xt = (1)kt Z0 which implies that Xt is weakly stationary

when c = k. For c 6= k we have

X (t) = E[Z0 ] cos(ct) = 0,

and for the autocovariance

X (t + h, t) = Cov(Xt+h , Xt ) = Cov(Z0 cos(c(t + h)), Z0 cos(ct))

= cos(c(t + h)) cos(ct) Cov(Z0 , Z0 ) = cos(c(t + h)) cos(ct) 2 .

The process {Xt : t Z} is (weakly) stationary when c = k, k Z and not

(weakly) stationary when c 6= k, k Z, see 1.4. c).

f) For the mean we have

X (t) = E[Zt Zt1 ] = 0,

and

X (t + h, t) = Cov(Xt+h , Xt ) = Cov(Zt+h Zt+h1 , Zt Zt1 )

4

if h = 0,

= E[Zt+h Zt+h1 Zt Zt1 ] =

0

otherwise.

Since X (t) and X (t + h, t) do not depend on t, {Xt : t Z} is (weakly) stationary.

Problem 1.5. a) We have

X (t + h, t) = Cov(Xt+h , Xt ) = Cov(Zt+h + Zt+h2 , Zt + Zt2 )

= Cov(Zt+h , Zt ) + Cov(Zt+h , Zt2 ) + Cov(Zt+h2 , Zt )

+ 2 Cov(Zt+h2 , Zt2 )

= 1{0} (h) + 1{2} (h) + 1{2} (h) + 2 1{0} (h)

1 + 2 if h = 0,

1.64 if h = 0,

=

=

if |h| = 2.

0.8 if |h| = 2.

4

Hence the ACVF depends only on h and we write X (h) = X (t + h, h). The ACF

is then

X (h)

1

if h = 0,

(h) =

=

0.8/1.64

0.49

if |h| = 2.

X (0)

b) We have

1

1

Var

(X1 + X2 + X3 + X4 ) =

Var(X1 + X2 + X3 + X4 )

4

16

1

=

Var(X1 ) + Var(X2 ) + Var(X3 ) + Var(X4 ) + 2 Cov(X1 , X3 )

16

+ 2 Cov(X2 , X4 )

=

1

1.64 + 0.8

1

4X (0) + 4X (2) = X (0) + X (2) =

= 0.61.

16

4

4

1.64 0.8

1

Var

(X1 + X2 + X3 + X4 ) =

= 0.21.

4

4

Because of the negative covariance at lag 2 the variance in c) is considerably smaller.

Problem 1.8. a) First we show that {Xt : t Z} is WN (0, 1). For t even we have

E[Xt ] = E[Zt ] = 0 and for t odd

2

Zt1 1

1

2

E[Xt ] = E

= E[Zt1

1] = 0.

2

2

Next we compute the ACVF. If t is even we have X (t, t) = E[Zt2 ] = 1 and if t is

odd

"

2 #

2

1

Zt1

1

1

4

2

X (t, t) = E

= E[Zt1

2Zt1

+ 1] = (3 2 + 1) = 1.

2

2

2

If t is even we have

X (t + 1, t) = E

1

Zt2 1

Zt = E[Zt3 Zt ] = 0,

2

2

and if t is odd

Z2 1

Z

1

X (t + 1, t) = E Zt+1 t1

= E[Zt+1 ]E t1

= 0.

2

2

1 if h = 0,

X (t + h, h) =

0 otherwise.

Thus {Xt : t Z} is WN (0, 1). If t is odd Xt and Xt1 is obviously dependent so

{Xt : t Z} is not IID (0, 1).

b) If n is odd

E[Xn+1 | X1 , . . . , Xn ] = E[Zn+1 | Z0 , Z2 , Z4 . . . , Zn1 ] = E[Zn+1 ] = 0.

If n is even

E[Xn+1 | X1 , . . . , Xn ] = E

Z2 1

X2 1

Zn2 1

| Z0 , Z2 , Z4 , . . . , Zn = n

= n

.

2

2

2

5

q

X

q

X

1

aj mtj =

(c0 + c1 (t j))

2q + 1 j=q

j=q

q

q

X

X

c

1

1

t (2q + 1)

=

c0 (2q + 1) + c1

(t j) = c0 +

j

2q + 1

2q

+

1

j=q

j=q

q

q

X

c1 X

= c0 + c1 t

j+

j

2q + 1 j=1

j=1

= c0 + c1 t = mt

b) We have

E [At ] = E

q

X

j=q

q

X

aj Ztj =

q

X

aj E [Ztj ] = 0

and

j=q

aj Ztj =

j=q

q

X

j=q

q

X

1

(2q + 1)

2 =

j=q

2

2q + 1

We see that the variance Var(At ) is small for large q. Hence, the process At will be

close to its mean (which is zero) for large q.

Problem 1.15. a) Put

Zt = 12 Xt = (1 B)(1 B 12 )Xt = (1 B)(Xt Xt12 )

= Xt Xt12 Xt1 + Xt13

= a + bt + st + Yt a b(t 12) st12 Yt12 a b(t 1) st1 Yt1

+ a + b(t 13) + st13 + Yt13

= Yt Yt1 Yt12 + Yt13 .

We have Z (t) = E[Zt ] = 0 and

Z (t + h, t) = Cov (Zt+h , Zt )

= Cov (Yt+h Yt+h1 Yt+h12 + Yt+h13 , Yt Yt1 Yt12 + Yt13 )

= Y (h) Y (h + 1) Y (h + 12) + Y (h + 13) Y (h 1) + Y (h)

+ Y (h + 11) Y (h + 12) Y (h 12) + Y (h 11)

+ Y (h) Y (h + 1) + Y (h 13) Y (h 12) Y (h 1) + Y (h)

= 4Y (h) 2Y (h + 1) 2Y (h 1) + Y (h + 11) + Y (h 11)

2Y (h + 12) 2Y (h 12) + Y (h + 13) + Y (h 13).

Since Z (t) and Z (t + h, t) do not depend on t, {Zt : t Z} is (weakly) stationary.

b) We have Xt = (a + bt)st + Yt . Hence,

Zt = 212 Xt = (1 B 12 )(1 B 12 )Xt = (1 B 12 )(Xt Xt12 )

= Xt Xt12 Xt12 + Xt24 = Xt 2Xt12 + Xt24

= (a + bt)st + Yt 2(a + b(t 12)st12 + Yt12 ) + (a + b(t 24))st24 + Yt24

= a(st 2st12 + st24 ) + b(tst 2(t 12)st12 + (t 24)st24 )

+ Yt 2Yt12 + Yt24

= Yt 2Yt12 + Yt24 .

6

Z (t + h, t) = Cov (Zt+h , Zt )

= Cov (Yt+h 2Yt+h12 + Yt+h24 , Yt 2Yt12 + Yt24 )

= Y (h) 2Y (h + 12) + Y (h + 24) 2Y (h 12) + 4Y (h)

2Y (h + 12) + Y (h 24) 2Y (h 12) + Y (h)

= 6Y (h) 4Y (h + 12) 4Y (h 12) + Y (h + 24) + Y (h 24).

Since Z (t) and Z (t + h, t) do not depend on t, {Zt : t Z} is (weakly) stationary.

Chapter 2

n+h = aXn + b of Xn+h by

Problem 2.1. We find the best linear predictor X

n+h ] = 0 and E[(Xn+h X

n+h )Xn ] = 0. We

finding a and b such that E[Xn+h X

have

n+h ] = E[Xn+h aXn b] = E[Xn+h ] aE[Xn ] b = (1 a) b

E[Xn+h X

and

n+h )Xn ] = E[(Xn+h aXn b)Xn ]

E[(Xn+h X

= E[Xn+h Xn ] aE[Xn2 ] bE[Xn ]

= E[Xn+h Xn ] E[Xn+h ]E[Xn ] + E[Xn+h ]E[Xn ]

= Cov(Xn+h , Xn ) + 2 a Cov(Xn , Xn ) + 2 b

= (h) + 2 a (0) + 2 b,

which implies that

b = (1 a) ,

a=

(h) + 2 b

.

(0) + 2

n+h = (h)Xn + (1 (h)).

i.e. X

Problem 2.4. a) Put Xt = (1)t Z where Z is random variable with E[Z] = 0 and

Var(Z) = 1. Then

X (t + h, t) = Cov((1)t+h Z, (1)t Z) = (1)2t+h Cov(Z, Z) = (1)h = cos(h).

b) Recall problem 1.4 b) where Xt = Z1 cos(ct) + Z2 sin(ct) implies that X (h) =

cos(ch). If we let Z1 , Z2 , Z3 , Z4 , W be independent random variables with zero mean

and unit variance and put

Xt = Z1 cos

t + Z2 sin

t + Z3 cos

t + Z4 sin

t + W.

2

2

4

4

Then we see that X (h) = (h).

c) Let {Zt : t Z} be WN 0, 2 and put Xt = Zt + Zt1 . Then E[Xt ] = 0 and

X (t + h, t) = Cov(Zt+h + Zt+h1 , Zt + Zt1 )

= Cov(Zt+h , Zt ) + Cov(Zt+h , Zt1 ) + Cov(Zt+h1 , Zt )

+ 2 Cov(Zt+h1 , Zt1 )

2

(1 + 2 ) if h = 0,

2

if |h| = 1,

=

0

otherwise.

If we let 2 = 1/(1+2 ) and choose such that 2 = 0.4, then we get X (h) = (h).

Hence, we choose so that /(1 + 2 ) = 0.4, which implies that = 1/2 or = 2.

Problem 2.8. Assume that there exists a stationary solution {Xt : t Z} to

Xt = Xt1 + Zt ,

8

t = 0, 1, . . .

Xt = Xt1 + Zt = 2 Xt2 + Zt1 + Zt = . . . = n+1 Xt(n+1) +

n

X

i Zti ,

i=0

Xt n+1 Xt(n+1) =

n

X

i Zti .

i=0

We have that

Var

n

X

i=0

!

i

Zti

n

X

2i Var (Zti ) =

i=0

n

X

2 = (n + 1) 2 .

i=0

This mean that (n + 1) 2 4(0), n. Letting n implies that (0) = ,

which is a contradiction, i.e. there exists no stationary solution.

Problem 2.11. We have that {Xt : t Z} is an AR(1) process with mean so

{Xt : t Z} satisfies

Xt = (Xt1 ) + Zt ,

{Zt : t Z} WN 0, 2 ,

|h|

Pn

We estimate by X n = n1 k=1 Xk . For large values

P of n X n is approximately

normally distributed with mean and variance n1 |h|< (h) (see Section 2.4 in

Brockwell and Davis). In our case the variance is

!

X

2

1

1

1

2

h

1+2

=

1

+

2

1

n

1 2

n

1

1 2

h=1

1

2

2

1 1+

2

2

=

1

=

=

.

n 1

1 2

n 1 1 2

n(1 )2

2

2 ). A 95% confidence interval is given by

). Putting in the numeric values gives

I = 0.271 0.69. Since 0 I the hypothesis that = 0 can not be rejected.

n+1 = Pn Xn+1 = a0 + a1 Xn + + an X1 . We may assume

Problem 2.15. Let X

that X (t) = 0. Otherwise we can consider Yt = Xt . Let S(a0 , a1 , . . . , an ) =

n+1 )2 ] and minimize this w.r.t. a0 , a1 , . . . , an .

E[(Xn+1 X

n+1 )2 ]

S(a0 , a1 , . . . , an ) = E[(Xn+1 X

= E[(Xn+1 a0 a1 Xn an X1 )2 ]

= a20 2a0 E[Xn+1 a1 Xn an X1 ]

+ E[(Xn+1 a1 Xn an X1 )2 ]

= a20 + E[(Xn+1 a1 Xn an X1 )2 ].

Differentiation with respect to ai gives

S

= 2a0 ,

a0

S

= 2E[((Xn+1 a1 Xn an X1 )Xn+1i ],

ai

9

i = 1, . . . , n.

Putting the partial derivatives equal to zero we get that S(a0 , a1 , . . . , an ) is minimized if

a0 = 0

for each k = 1, . . . , n.

n+1 )Xk ]

0 = E[(Xn+1 X

= E[(1 Xn + + p Xnp+1 + Zn+1 a1 Xn an X1 )Xk ].

This is clearly satisfied if we let

ai = i ,

ai = 0,

if 1 i p

if i > p

Since there is best linear predictor is unique this is the one. The mean square error

is

2

n+1 )2 ] = E[Zn+1

E[(Xn+1 X

] = 2 .

10

Chapter 3

Problem 3.1. We write the ARMA processes as (B)Xt = (B)Zt . The process

{Xt : t Z} is causal if and only if (z) 6= 0 for each |z| 1 and invertible if and

only if (z) 6= 0 for each |z| 1.

a) (z) = 1 + 0.2z 0.48z 2 = 0 is solved by z1 = 5/3 and z2 = 5/4.

Hence {Xt : t Z} is causal.

(z) = 1. Hence {Xt : t Z} is invertible.

b) (z) = 1 + 1.9z + 0.88z 2 = 0 is solved by z1 = 10/11 and z2 = 5/4.

Hence {Xt : t Z} is not causal.

is invertible.

c) (z) = 1 + 0.6z = 0 is solved by z = 5/3. Hence {Xt : t Z} is causal.

(z) = 1 + 1.2z = 0 is solved by z = 5/6. Hence {Xt : t Z} is not invertible.

d) (z) = 1 + 1.8z + 0.81z 2 = 0 is solved by z1 = z2 = 10/9.

Hence {Xt : t Z} is causal.

(z) = 1. Hence {Xt : t Z} is invertible.

e) (z) = 1 + 1.6z = 0 is solved by z = 5/8. Hence {Xt : t Z} is not causal.

(z) = 1 0.4z + 0.04z 2 = 0 is solved by z1 = z2 = 5.

Hence {Xt : t Z} is invertible.

obtain the Yule-Walker equations we multiply each side by Xtk and take expected

value. Then we get

E[Xt Xtk ] = 0.8E[Xt2 Xtk ] + E[Zt Xtk ],

which gives us

(0) = 0.8(2) + 2

(k) = 0.8(k 2),

k 1.

(0) 0.8(2) = 2

(1) 0.8(1) = 0

(2) 0.8(0) = 0

First we see that (1) = 0 and therefore (h) = 0 if h is odd. Next we solve for

(0) and we get (0) = 2 (1 0.82 )1 . It follows that (2k) = (0)0.8k and hence

the ACF is

h = 0,

1

0.8h , h = 2k, k = 1, 2, . . .

(h) =

0

otherwise.

The PACF can be computed as (0) = 1, (h) = hh where hh comes from that

the best linear predictor of Xh+1 has the form

h+1 =

X

h

X

hi Xh+1i .

i=1

11

For an AR(2) process we have X

(0) = 1, (1) = 0, (2) = 0.8 and (h) = 0 for h 3.

Problem 3.6. The ACVF for {Xt : t Z} is

X (t + h, t) = Cov(Xt+h , Xt ) = Cov(Zt+h + Zt+h1 , Zt + Zt1 )

= Z (h) + Z (h + 1) + Z (h 1) + 2 Z (h)

2

(1 + 2 ), h = 0

=

2 ,

|h| = 1.

On the other hand, the ACVF for {Yt : t Z} is

Y (t + h, t) = Cov(Yt+h , Yt ) = Cov(Zt+h + 1 Zt+h1 , Zt + 1 Zt1 )

= Z (h) + 1 Z (h + 1) + 1 Z (h 1) + 2 Z (h)

2 2

(1 + 2 ) = 2 (1 + 2 ), h = 0

=

2 2 1 = 2 ,

|h| = 1.

Hence they are equal.

2

Problem 3.7. First we show that {Wt : t Z} is WN 0, w

.

X

X

j

E[Wt ] = E

() Xtj =

()j E[Xtj ] = 0,

j=0

j=0

since E[Xtj ] = 0 for each j. Next we compute the ACVF of {Wt : t Z} for

h 0.

X

X

W (t + h, t) = E[Wt+h Wt ] = E ()j Xt+hj

()k Xtk

j=0

k=0

j=0 k=0

()j ()k X (h j + k)

j=0 k=0

X

=

()(j+k) 2 (1 + 2 )1{jk} (h) + 2 1{jk+1} (h) + 2 1{jk1} (h)

=

j=0 k=0

()(j+jh) 2 (1 + 2 ) +

j=h

()(j+jh+1) 2

j=h1,j0

()(j+jh1) 2

j=h+1

= 2 (1 + 2 )()h

()2(jh) + 2 ()(h1)

j=h

X

(h+1)

+ 2 ()

()2(j(h1))

j=h1,j0

()2(j(h+1))

j=h+1

2

2

+ 2 ()(h1) 2

+ 2 2 1{0} (h)

1

1

2

+ 2 ()(h+1) 2

1

2

= 2 ()h 2

1 + 2 2 1 + 2 2 1{0} (h)

1

= 2 2 1{0} (h)

= 2 (1 + 2 )()h

12

2

2

Hence, {Wt : t Z} is WN 0, w

with w

= 2 2 . To continue we have that

Wt =

()j Xtj =

j=0

j Xtj ,

j=0

P

P

with j = ()j and j=0 |j | = j=0 j < so {Xt : t Z} is invertible and

P

solves (B)Xt = (B)Wt with (z) = j=0 j z j = (z)/(z). This implies that

we must have

X

j=0

j z j =

X

(z)

z j

1

=

.

1

+

z/

(z)

j=0

Problem 3.11. The PACF can be computed as (0) = 1, (h) = hh where hh

comes from that the best linear predictor of Xh+1 has the form

h+1 =

X

h

X

hi Xh+1i .

i=1

3 = 21 X2 + 22 X1 .

X

The best linear predictor satisfies

3 , Xi ) = 0,

Cov(X3 X

i = 1, 2.

This gives us

3 , X1 ) = Cov(X3 21 X2 22 X1 , X1 )

Cov(X3 X

= Cov(X3 , X1 ) 21 Cov(X2 , X1 ) 22 Cov(X1 , X1 )

= (2) 21 (1) 22 (0) = 0

and

3 , X2 ) = Cov(X3 21 X2 22 X1 , X2 )

Cov(X3 X

= (1) 21 (0) 22 (1) = 0.

Since we have an MA(1) process it has ACVF

2

(1 + 2 ), h = 0,

2 ,

|h| = 1,

(h) =

0,

otherwise.

Thus, we have to solve the equations

21 (1) + 22 (0) = 0

(1 22 )(1) 21 (0) = 0.

Solving this system of equations we find

22 =

2

.

+ 2 + 1

13

Chapter 4

P

Problem 4.4. By Corollary 4.1.1 we know that a function (h) with |h|< |(h)|

is ACVF for some stationary process if and only if it is an even function and

f () =

1 X ih

e

(h) 0,

2

for (, ].

h=

f () =

3

1 X ih

e

(h)

2

h=3

1

=

2

1

=

2

1

=

2

(1 0.5 cos(3) cos(2)) .

1/(4). Hence, (h) is NOT an ACVF for a stationary time series.

Problem 4.5. Let Zt = Xt + Yt . First we show that Z (h) = X (h) + Y (h).

Z (t + h, t) = Cov(Zt+h , Zt ) = Cov(Xt+h + Yt+h , Xt + Yt )

= Cov(Xt+h , Xt ) + Cov(Xt+h , Yt ) + Cov(Yt+h , Xt ) + Cov(Yt+h , Yt )

= Cov(Xt+h , Xt ) + Cov(Yt+h , Yt )

= X (t + h, t) + Y (t + h, t).

We have that

Z

eih dFZ ()

Z (h) =

(,]

Z

Z

Z (h) = X (h) + Y (h) =

eih dFX () +

eih dFY ()

(,]

(,]

Z

ih

=

e (dFX () + dFY ())

(,]

Hence we have that dFZ () = dFX () + dFY (), which implies that

Z

Z

FZ () =

dFZ () =

(dFX () + dFY ()) = FX () + FY ().

(,]

(,]

2

(1 + 2 ), h = 0,

2 ,

|h| = 1,

Y (h) =

0,

otherwise.

By Problem 2.2 the process St = A cos(t/3) + B sin(t/3) has ACVF S (h) =

2 cos(h/3). Since the processes are uncorrelated, Problem 4.5 gives that X (h) =

S (h) + Y (h). Moreover,

Z

2 ih/3

(e

+ eih/3 ) =

eih dFS (),

2 cos(h/3) =

2

14

where

dFS () =

2

2

( /3) d + ( + /3) d

2

2

This implies

< /3,

0,

2 /2, /3 < /3,

FS () =

2

,

/3.

Furthermore we have that

1 X ih

1 i

e

e Y (1) + Y (0) + ei Y (1)

Y (h) =

2

2

fY () =

h=

2

1 2

=

1 + 2.52 + 2.5 2 ei + ei =

(7.25 + 5 cos()).

2

2

This implies that

Z

FY () =

fY ()d =

2

2

(7.25 + 5 cos())d =

7.25 + 5 sin()

2

2

(7.25( + ) + 5 sin()).

2

Problem 4.9. a) We start with X (0),

Z

X (0) =

i0

fX ()d = 100

6 +0.01

6 +0.01

d + 100

6 0.01

d = 100 0.04 = 4.

6 0.01

Z

X (1) =

= 100

ei fX ()d

Z 6 +0.01

i

e d + 100

6 0.01

i 6 +0.01

6 +0.01

ei d

6 0.01

i 6 +0.01

e

e

= 100

+ 100

i 0.01

i 0.01

6

6

100 i( +0.01)

i(

+0.01)

e 6

=

e 6

+ ei( 6 +0.01) ei( 6 +0.01)

i

+ 0.01

= 200 sin + 0.01 + sin

6

6

b) Let

Yt = 12 Xt = Xt Xt12 =

X

k=

15

k Xtk ,

fY () = |(ei )|2 fX () where

(ei ) =

k eik = 1 ei12 .

k=

Hence,

2

fY () = 1 e12i fX () = (1 e12i )(1 e12i )fX ()

= 2(1 cos(12))fX ().

The power transfer function |(ei )|2 is plotted in Figure 4.9(b) and the resulting

spectral density fY () is plotted in Figure 4.9(c).

c) The variance of Yt is Y (0) which is computed by

Z

Y (0) =

fY ()d

6 +0.01

Z

= 200

Z

(1 cos(12))d + 200

6 0.01

6 +0.01

(1 cos(12))d

6 0.01

sin(12) i 6 +0.01

sin(12) i 6 +0.01 h

+

= 200

12

12

6 0.01

6 0.01

= 200 0.02

12

+0.02

12

= 200 0.04 +

6

1

= 200 0.04 sin(0.12) = 0.0192.

3

Problem 4.10. a) Let (z) = 1 z and (z) = 1 z. Then Xt =

(B)

(B) Zt

and

(ei ) 2

(ei ) 2 2

fX () =

fZ () =

.

(ei )

(ei ) 2

For {Wt : t Z} we get

2

2

2

1 i

(e

i

i 2 2

e

1

1 ei 2

) (e )

=

.

fW () =

i ) (ei ) 2

(e

1 1 ei 2 |1 ei |2 2

i 2

2

1 1 ei = 1 ei 2 = e

ei 2 = 1 ei 12

2

2

2

1

1

2

2

= 2 1 ei = 2 1 ei .

computation above we get

2

1

i 2

1 ei 2

2 2

2 1 e

= 2

fW () = 1

2

2

i | |1 ei | 2

2

2 |1 e

16

100

80

60

40

20

0

0

/6

/3

/2

2/3

5/6

2/3

5/6

(a) fX ()

4

3

2

1

0

0

/6

/3

/2

2

(b) ei

1.5

0.5

/60.01

/6

/6+0.01

(c) fY ()

17

which is constant.

b) Since {Wt : t Z} has constant spectral density it is white noise and

Z

2 2

2

2

w

= W (0) =

fW ()d = 2

2 = 2 2 .

2

t = (B)Wt which is a causal

and invertible representation.

18

Chapter 5

Problem 5.1. We begin by writing the Yule-Walker equations. {Yt : t Z}

satisfies

Yt 1 Yt1 2 Yt2 = Zt ,

{Zt : t Z} WN(0, 2 ).

2

k = 0,

(k) 1 (k 1) 2 (k 2) =

0

k 1.

We rewrite the first three equations as

1 (k 1) + 2 (k 2) =

(k)

(0) 2

k = 1, 2,

k = 0.

1

(1)

(0) (1)

, =

, 2 =

2 =

2

(2)

(1) (0)

2 and 2 by

2 and

we have 2 = 2 and 2 (0) T 2 . We replace 2 by

for . That is, we solve

solve to get an estimate

=

2

2

T

2.

2 = (0)

Hence

1

(0)

(1)

(1)

(1) (0)

(2)

(0)2 (1)2

1

(0)

(1)

(1)

(2)

=

.

(1)2

(0)

(2)

(0)2 (1)2

=

1

2 2 =

We get that

(

(0) (2))

(1)

1 =

= 1.32

(0)2 (1)2

(0)

(2) (1)2

= 0.634

2 =

(0)2 (1)2

AN(, 2 1 /n) and approximately

AN(,

1 /n).

We also have that

2

2

2

Here

289.18

0.0021 0.0017

0.0060 0.0048

2 1

2 /n =

=

0.0017 0.0021

0.0048 0.0060

100

So we have approximately 1 N (1 , 0.0060) and 2 N (2 , 0.0060) and the

confidence intervals are

2

19

Problem 5.3. a) {Xt : t Z} is causal if (z) 6= 0 for |z| 1 so let us check for

which values of this can happen. (z) = 1 z 2 z 2 so putting this equal to

zero implies

z

1

1 5

1+ 5

2

z + 2 = 0 z1 =

and z2 =

2

2

Furthermore |z1 | > 1 if || < ( 5 1)/2 = 0.61 and |z2 | > 1 if || < (1 + 5)/2 =

1.61. Hence, the process is causal if || < 0.61.

b) The Yule-Walker equations are

2

k = 0,

(k) (k 1) 2 (k 2) =

0 k 1.

Rewriting the first 3 equations and using (k) = (k) gives

(0) (1) 2 (2) = 2

(1) (0) 2 (1) = 0

(2) (1) 2 (0) = 0.

Multiplying the third equation by 2 and adding the first gives

3 (1) (1) 4 (0) + (0) = 2

(1) (0) 2 (1) = 0.

We solve the second equation to obtain

s

1

=

2(1)

1

+ 1.

4(1)2

(1) gives the solutions

= {0.509, 1.965} and we choose the causal solution = 0.509. Inserting this

value in the expression for 2 we get

(1) 4 (0) + (0) = 2.985.

2 = 3 (1)

Problem 5.4. a) Let

us construct a test to see if the assumption that {Xt :

2

t Z}

is

WN

0,

95% confidence interval for (k) is then I(k) = (k) 0.025 / 200. This gives us

I(1) = 0.427 0.139

I(2) = 0.475 0.139

I(3) = 0.169 0.139.

Clearly 0

/ I(k) for any of the observed k = 1, 2, 3 and we conclude that it is not

reasonable to assume that {Xt : t Z} is white noise.

b) We estimate the mean by

= x200 = 3.82. The Yule-Walker estimates is given

by

=R

1 2 ,

1 2 ),

2 = (0)(1 2 T R

2

where

1

2

2 =

, R

(0) (1)

(1) (0)

20

2 =

,

(1)

(2)

2 = 0.8199.

c) We construct a 95% confidence interval for to test if we can reject the hypothesis

that = 0. We have that X 200 AN(, /n) with

h=

p

p

I = xn 0.025 /n = 3.82 1.96 3.61/200 = 3.82 0.263.

Since 0

/ I we reject the hypothesis that = 0.

AN(,

1 /n). Inserting the observed values

d) We have that approximately

2

2

we get

2

2

n

0.0050

0.0021

0.0021

0.0050

and hence 1 AN(1 , 0.0050) and 2 AN(2 , 0.0050). We get the 95% confidence intervals

2

e) If the data were generated from an AR(2) process, then the PACF would be

(0) = 1,

(1) = (1) = 0.427,

(2) = 2 = 0.358 and

(h) = 0 for h 3.

Problem 5.11. To obtain the maximum likelihood estimator we compute as if the

process were Gaussian. Then the innovations

1 = X1 N (0, 0 ),

X1 X

2 = X2 X1 N (0, 1 ),

X2 X

1 )2 ], 1 = 2 r1 = E[(X2 X

2 )2 ]. This implies

where 0 = 2 r0 = E[(X1 X

2

2

2

2 ) ] = (0)2(1)+2 (0)

0 = E[X1 ] = (0), r0 = 1/(1 ) and 1 = E[(X2 X

and hence

r1 =

(0)(1 + 2 ) 2(1)

1 + 2 22

=

= 1.

2

1 2

Here we have used that (1) = 2 /(1 2 ). Since the distribution of the innova j is

tions is normal the density for Xj X

fXj X j

x2

1

exp 2

=p

2 rj1

2 2 rj1

(x1 x

1 )2

(x2 x

2 )2

1

L(, ) =

fXj X j

+

exp 2

2

r0

r1

(2 2 )2 r0 r1

j=1

2

x1

(x2 x1 )2

1

1

+

.

=p

exp 2

2

r0

r1

(2 2 )2 r0 r1

2

2

Y

=p

21

1

1 x2

(x2 x1 )2

log L(, 2 ) = log(4 2 4 r0 r1 ) 2 1 +

2

2 r0

r1

1

1 2

2 4

2

2

= log(4 /(1 )) 2 x1 (1 ) + (x2 x1 )2

2

2

1

1

2

= log(2) log( ) + log(1 2 ) 2 x21 (1 2 ) + (x2 x1 )2 .

2

2

Differentiating yields

1

1

l(, 2 )

= 2 + 4 x21 (1 2 ) + (x2 x1 )2 ,

2

2

l(, 2 )

1 2

x1 x2

=

+ 2 .

2

2 1

then after some computations = 2x1 x2 /(x21 + x22 ). Inserting the expression for

is the equation for gives the maximum likelihood estimators

2 =

(x21 x22 )2

2x1 x2

and = 2

2

2

2(x1 + x2 )

x1 + x22

22

Chapter 6

Problem 6.5. The best linear predictor of Yn+1 in terms of 1, X0 , Y1 , . . . , Yn i.e.

Yn+1 = a0 + cX0 + a1 Y1 + + an Yn ,

must satisfy the orthogonality relations

Cov(Yn+1 Yn+1 , 1) = 0

Cov(Yn+1 Yn+1 , X0 ) = 0

Cov(Yn+1 Yn+1 , Yj ) = 0,

j = 1, . . . , n.

Cov(Yn+1 Yn+1 , X0 ) = E[(Yn+1 a0 + cX0 + a1 Y1 + + an Yn )X0 ] = cE[X02 ] = 0

so we must have c = 0. This does not effect the other equations since E[Yj X0 ] = 0

for each j.

Problem 6.6. Put Yt = Xt . Then {Yt : t Z} is an AR(2) process. We can

rewrite this as Xt+1 = Yt + Xt1 . Putting t = n + h and using the linearity of the

projection operator Pn gives Pn Xn+h = Pn Yn+h + Pn Xn+h1 . Since {Yt : t Z} is

AR(2) process we have Pn Yn+1 = 1 Yn + 2 Yn1 , Pn Yn+2 = 1 Pn Yn+1 + 2 Yn and

iterating we find Pn Yn+h = 1 Pn Yn+h1 + 2 Pn Yn+h2 . Let (z) = (1 z)(z) =

1 1 z 2 z 2 3 z 3 . Then

(1 z)(z) = 1 1 z 2 z z + 1 z 2 + 2 z 3 ,

i.e. 1 = 1 + 1, 2 = 2 1 and 3 = 2 . Then

Pn Xn+h =

3

X

j Xn+hj .

j=1

Pn Yn+h = 1 Pn Yn+h1 + 2 Pn Yn+h2

= 1 (Pn Xn+h1 Pn Xn+h2 ) + 2 (Pn Xn+h2 Pn Xn+h3 )

= 1 Pn Xn+h1 + (2 1 )Pn Xn+h2 2 Pn Xn+h3 .

and then

Pn Xn+h = Pn Yn+h + Pn Xn+h1

= (1 + 1)Pn Xn+h1 + (2 1 )Pn Xn+h2 2 Pn Xn+h3

= 1 Pn Xn+h1 + 2 Pn Xn+h2 + 3 Pn Xn+h3 .

Hence, we have

g(h) =

Xn+h ,

h 0.

We may suggest a solution of the form g(h) = a+b1h +c2h , h > 3 where 1 and

2 are the solutions to (z) = 0 and g(2) = Xn2 , g(1) = Xn1 and g(0) = Xn .

Let us first find the roots 1 and 2 .

4

1

16

(z) = 1 0.8z + 0.25z 2 = 1 z + z 2 = 0 z 2 z + 4 = 0.

5

4

5

23

p

We get that z = 8/5 (8/5)2 4 = (8 6i)/5. Then 11 = 5/(8 + 6i) = =

0.4 0.3i and 21 = 0.4 + 0.3i. Next we find the constants a, b and c by solving

Xn2 = g(2) = a + b12 + c22 ,

Xn1 = g(1) = a + b11 + c21 ,

Xn = g(0) = a + b + c.

Note that (0.4 0.3i)2 = 0.07 0.24i and (0.4 + 0.3i)2 = 0.07 + 0.24i so we get the

equations

Xn2 = a + b(0.07 0.24i) + c(0.07 + 0.24i),

Xn1 = a + b(0.4 0.3i) + c(0.4 + 0.3i),

Xn = a + b + c.

Let a = a1 + a2 i, b = b1 + b2 i and c = c1 + c2 i. Then we split the equations into a

real part and an imaginary part and get

Xn2 = a1 + 0.07b1 + 0.24b2 + 0.07c1 0.24c2 ,

Xn1 = a1 + 0.4b1 + 0.3b2 + 0.4c1 0.4c2 ,

Xn = a1 + b1 + c1 ,

0 = a2 + 0.07b2 0.24b1 + 0.07c2 + 0.24c1 ,

0 = a2 + 0.4b2 0.3b1 + 4c2 + 0.3c1 ,

0 = a2 + b2 + c2 .

We can write this

1 0

1 0

1 0

0 1

0 1

0 1

as a matrix equation by

0.07 0.24

0.4

0.3

1

0

0.24 0.07

0.3 0.4

0

1

0.07

0.4

1

0.24

0.3

0

0.24

0.3

0

0.07

0.4

1

a1

a2

b1

b2

c1

c2

Xn2

Xn1

Xn

0

0

0

0.88Xn1 + 0.22Xn + (2.22Xn2 + 3.44Xn1 1.22Xn )i.

24

Chapter 7

Problem 7.1. The problem is not very well formulated; we replace the condition

Y (h) 0 as h by the condition that Y (h) is strictly decreasing.

The process is stationary if

t = E[(X1,t , X2,t )T ] = (1 , 2 )T and (t + h, t) does

not depend on t. We may assume that {Yt } has mean zero so that

E[X1,t ] = E[Yt ] = 0

E[X2,t ] = E[Ytd ] = 0,

and the covariance function is

Y (h)

Y (h + d)

=

.

Y (h d)

Y (h)

E[Yt+h Yt ]

E[Yt+hd Yt ]

E[Yt+h Ytd ]

E[Yt+hd Ytd ]

Since neither

t or (t + h, t) depend on t, the process is stationary. We assume

that Y (h) 0 as h . Then we have that the cross-correlation

12 (h) = p

12 (h)

11 (0)22 (0)

Y (h + d)

= Y (h + d).

Y (0)

Problem 7.3. We want to estimate the cross-correlation

p

12 (h) = 12 (h)/ 11 (0)22 (0).

We estimate

(h) =

11 (h) 12 (h)

21 (h) 22 (h)

by

Pnh

n )(Xt X

n )T 0 h n 1

(Xt+h X

T

(h)

n + 1 h < 0.

p

Then we get 12 (h) = 12 (h)/ 11 (0)

22 (0). According to Theorem 7.3.1 in Brockwell and Davis we have, for h 6= k, that

12 (h)

n

approx. N (0, )

n

21 (h)

(h)

=

1

n

t=1

where

11 = 22 =

12 = 21 =

X

j=

11 (j)22 (j)

11 (j)22 (j + k h).

j=

Since {X1,t } and {X2,t } are MA(1) processes we know that their ACFs are

1

h=0

X1 (h) =

0.8/(1 + 0.82 ) h = 1

1

h=0

X2 (h) =

0.6/(1 + 0.62 ) h = 1

25

Hence

j=

0.8

0.6

0.8

0.6

+1+

0.57.

1 + 0.82 1 + 0.62

1 + 0.82 1 + 0.62

For the covariance we see that 11 (j) 6= 0 if j = 1, 0, 1 and 22 (j + k h) 6= 0 if

j + k h = 1, 0, 1. Hence, the covariance is

=

if k h = 1

j=

j=

j=

if k h = 2

if k h = 2.

j=

Problem 7.5. We have {Xt : t Z} is a causal process if det ( (z)) 6= 0 for all

|z| 1, due to Brockwell-Davis page 242. Further more we have that if {Xt : t Z}

is a causal process, then

Xt =

j Ztj ,

j=0

where

j = j +

k jk

k=1

0 = I

j = 0 for j > q

j = 0 for j > p

j = 0 for j < 0

and

(h) =

h+j Tj ,

h = 0, 1, 2, . . .

j=0

process and then derive (h).

z 1 1

1 0

det((z)) = det(I z1 ) = det

0 1

2 0 1

z

z

1

1 2

2

2

= (2 z)

= det

0

1 z2

4

Which implies that |z1 | = |z2 | = 2 > 1 and hence {Xt : t Z} is a causal process.

We have that j = j + 1 j1 and

0 = 0 + 1 1 = 0 = I

1 = 1 + 1 0 = T1 + 1

n+1 = 1 n

for n 1.

26

From the last equation we get that n+1 = n1 1 = n1 (T1 + 1 ) and from the

definition of 1

2

1

1 5 4

1 n

n

T

1 = n

1 + 1 =

.

0 1

2

4 4 5

Assume that h 0, then

(h) =

h+j Tj = h +

j=0

= h +

h+j Tj

j=1

h+j1

T1 + 1

1

T

j1

T1 + 1

1

j=1

= h + h1

2 T

j1 T1 + 1

j1

j=0

1

1 j 1 5 4

1 0

= h +

0 1 4 4 5 2j j 1

j=0

X

1

5 + 8j + 5j 2 4 + 5j

h1

= h + 1

4 + 5j

5

4 j=0 22j

94/27 17/9

= h + h1

.

17/9 5/3

h1

1

2j

We have that

(

h =

I,

h1

1

h=0

T1

+ 1 , h > 0

(0) =

1 0

0 1

94/27

17/9

17/9

5/3

121/27 17/9

17/9

8/3

94/27 17/9

(h) = 1h1 T1 + 1 + h1

17/9 5/3

1 2 1

1 1 1

94/27 17/9

= 1h1

+

17/9 5/3

2 1 2

2 0 1

1

1 h1

199/27 41/9

= h

.

0

1

26/9 11/3

2

27

Chapter 8

Problem 8.7. First we would like to show that

1

Zt+1

Xt+1 =

0

Zt

(8.1)

is a solution to

Xt+1 =

0 1

0 0

Xt +

Zt+1 .

(8.2)

Let

A=

0

0

1

0

and B =

A =

0

0

0

0

Xt+1 = AXt + BZt+1 = A (AXt1 + BZt ) + BZt+1 = A2 Xt1 + ABZt + BZt+1

Zt+1

1

Zt + Zt+1

1

,

=

Zt+1 =

Zt +

=

Zt

0

Zt+1

0

and hence (8.1) is a solution to equation (8.2). Next we prove that (8.1) is a unique

solution to (8.2). Let X0t+1 be another solution to equation (8.2) and consider the

difference

Xt+1 X0t+1 = AXt + BZt+1 AX0t BZt+1 = A (Xt X0t )

since A2 = 0. This implies that Xt+1 = X0t+1 , i.e. (8.1) is a unique solution to

(8.2). Moreover, Xt is stationary since

1

E[Zt ]

0

X (t) =

=

0

E[Zt1 ]

0

and

11 (t + h, t) 12 (t + h, t)

21 (t + h, t) 22 (t + h, t)

X (t + h, t) =

=

Cov(Zt+h , Zt + Zt1 )

Cov(Zt+h , Zt )

2

1 + 1{0} (h) + 1{1,1} (h) 1{0} (h) + 2 1{1} (h)

2

=

,

1{0} (h) + 2 1{1} (h)

2 1{0} (h)

i.e. neither of them depend on t. Now we see that

1

Zt

Yt = [1 0]Xt = [1 0]

= [1

0

Zt1

which is the MA(1) process.

28

Zt

Zt1

= Zt + Zt1 ,

Problem 8.9. Let Yt consist of Yt,1 and Yt,2 , then we can write

Yt,1

G1 Xt,1 + Wt,1

G1 Xt,1

Wt,1

Yt =

=

=

+

Yt,1

G2 Xt,2 + Wt,2

G2 Xt,2

Wt,2

G1 0

Xt,1

Wt,1

=

+

.

Xt,2

Wt,2

0 G2

Set

G=

G1

0

0

G2

Xt =

Xt,1

Xt,1

and Wt =

Wt,1

Wt,2

Xt+1,1

F1 Xt,1 + Vt,1

F1 Xt,1

Vt,1

Xt+1 =

=

=

+

Xt+1,1

F2 Xt,2 + Vt,2

F2 Xt,2

Vt,2

F1 0

Xt,1

Vt,1

=

+

0 F2

Xt,2

Vt,2

and set

F =

F1

0

0

F2

and Vt =

Vt,1

Vt,2

Yt = GXt + Wt

Xt+1 = F Xt + Vt .

Problem 8.13. We have to solve

+ v2

2

=

2

+ w

which is equivalent to

2

v2 = 0.

2

+ w

2

Multiplying with + w

we get

2 2

2 v2 w

v = 0,

r

p

2 2

v2 v4 + 4w

1 2

v4

v

2

2

= v

+ w v =

.

2

4

2

Since 0 we have the positive root which is the solution we wanted.

Problem 8.14. We have that

t+1 = t + v2

2t

2

t + w

2

and since v2 = 2 /( + w

) substracting yields

2

2t

t+1 = t +

2

2

+ w

t + w

2

2

t t + w

2t

+ w

2

=

2

2

t + w

+ w

2

2

w

t w

=

2

2

t + w

+ w

2

= w

.

2

2

t + w

+ w

29

2

(t+1 )(t ) = w

2

2

t + w

+ w

(t ).

2

Now, note that the function f (x) = x/(x + w

) is increasing in x. Indeed, f 0 (x) =

2

2 2

w /(x + w ) > 0. Thus we get that for t > both terms are > 0 and for t <

both terms are < 0. Hence, (t+1 )(t ) 0.

2

2 = w

2

+ v2 .

2 (1 + 2 ) = 2w

2

From the first equation we get that 2 = w

/ and inserting this in the second

equation gives

2

2w

+ v2 =

2

w

(1 + 2 ),

2

2

2 2

(2w

+ v2 ) + w

+ w

= 0.

2 +

2

+ v2

2w

+1=0

2

w

2 2 + 2

= w 2 v

2w

p

2

2

2 + 2 )2

2w

+ v2 v4 + 4v2 w

(2w

v

1

=

.

4

2

4w

2w

p

2

2

+ v2 v4 + 4v2 w

2w

=

.

2

2w

2

w

To show that = 2 +

, recall the steady-state solution

w

v2 +

2

v4 + 4v2 w

,

2

which gives

p

2

2

2w

+ v2 v4 + 4v2 w

=

2

2w

p

p

2

2

2

2

2

2w + v v4 + 4v2 w

2w

+ v2 + v4 + 4v2 w

=

p

2 2 2 + 2 +

2

2w

v4 + 4v2 w

w

v

=

4

2

2

4

2

4w

+ 4v2 w

+ v4 v4 4v2 w

4w

w

=

.

2 (2 2 + 2)

2 ( 2 + )

2 +

2w

4w

w

w

w

30

Chapter 10

Problem 10.5. First a remark on existence of such a process: We assume for

simplicity that p = 1. A necessary and sufficient condition for the existence of a

causal, stationary solution to the ARCH(1) equations with E[Zt4 ] < is that 12 <

1/3. If p > 1 existence of a causal, stationary solution is much more complicated.

Let us now proceed with the solution to the problem.

We have

!

p

p

p

2

2

X

X

X

Z

e

e 2 ht

Z2

ti

2

= t 0 +

i Zti

= t = t = Yt ,

e2t 1 +

i Yti = e2t 1 +

i

0

0

0

0

i=1

i=1

i=1

hence Yt = Zt2 /0 satisfies the given equation. Let us now compute its ACVF. We

assume h 1, then

"

!

#

p

X

2

E[Yt Yth ] = E et 1 +

i Yti Yth

i=1

"

=

E[e2t ]E

Yth +

p

X

#

i Yti Yth

i=1

= E[Yth ] +

p

X

i E[Yti Yth ].

i=1

Y (h) + 2Y = Y +

p

X

i Y (h i) + 2Y

i=1

and then

Y (h)

p

X

i Y (h i) = Y + 2Y

e2t

Y = E[Yt ] = E

1+

p

X

!#

i Yti

p

X

=1+

p

X

i 1 .

i Y (h i) =

i=1

i E[Yt ] = 1 + Y

i=1

i=1

Y (h)

i=1

i=1

We can compute Y as

"

p

X

Pp

1

Pp

i=1

i=1

p

X

i .

i=1

Pp

(1

1

i=1

Pp i

i=1 i )2

= 0.

Y (0) = 1,

Y (h)

p

X

i Y (h i) = 0,

h 1,

i=1

which corresponds to the Yule-Walker equations for the ACF for an AR(p) process

Wt = 1 Wt1 + + p Wtp + Zt .

31

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