TS Module 5: Stationary processes HW
(The attached PDF file has better formatting.)
Homework assignment: general linear process
A time series has the form Yt = åt + ö × åt-1 – ö2 × åt-2 + ö3 × åt-3 – …
The plus and minus signs alternate. ö = 0.2 and ó2e = 9.
A. What is ã0, the variance of Yt? Show the derivation.
B. What is ã1, the covariance of Yt and Yt-1? Show the derivation.
C. What is ñ2, the correlation of Yt and Yt-2? Show the derivation.
(Show the algebra for the derivations. One or two lines is sufficient for each part.)