TS Module 3: Trends HW

(The attached PDF file has better formatting.)

Homework assignment: MA(1) Process: Variance of mean

Five MA(1) processes with 50 observations are listed below. The variance of å_t is 1.

A.     For each process, what is the variance of , the average of the Y observations?

B.     How does the pattern of the first time series differ from that of the last time series?

C.    Explain intuitively why oscillating patterns have lower variances of their means.

1.      Y_t = ì + e_t + e_t-1

2.      Y_t = ì + e_t + ½ e_t-1

3.      Y_t = ì + e_t

4.      Y_t = ì + e_t – ½ e_t-1

5.      Y_t = ì + e_t – e_t-1