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Tutorial 2 Week 2

Write out the AR(1) model. Describe what you know about the first lag, beta1, beta 0
and the error term.

Define covariance stationary.

E ( yt )

an estimated value for dependent variable

yt

Is the mean

Given the AR(1) process as

Using recursive substitution, write the AR(1) equation in the summation form that is

yt 0 1 yt 1 ut

, show that

E ( yt ) 0 /(1 1 )

yt 1j et j
show that

Given

j 0

yt 0 1 yt 1 ut

Show that

Explain MA(1) and ARMA(1,1) models.

(1 1 L)( yt ) et