TS Module 5 Stationary moving average processes
(The attached PDF file has better formatting.)
Time series MA(2) process practice problems
*Question 5.1: Variance of moving average process
A moving average process of order 2 is Yt = et – è1 et-1 – è2 et-2 , with ó2e = 1
What is ã0, the variance of Yt?
A. 1 – è1 – è2
B. 1 – è21 – è22
C. 1 – è1 – è22
D. 1 + è1 + è2
E. 1 + è21 + è22
Answer 5.1: E
Yt is the sum of three independent random variables
(See Cryer and Chan page 62, equation at bottom of page)