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Open in App**QUESTION**

Suppose that Yt follows the stationary AR(1) model Y_{t} = 2.5 + 0.7Y_{t - 1} + u_{t},

where u_{t} is i.i.d. with E(u_{t}) = 0 and var1ut2 = 9.

a. Compute the mean and variance of Y_{t}.

b. Compute the first two autocovariances of Y_{t}.

c. Compute the first two autocorrelations of Y_{t.}

d. Suppose that Y_{T} = 102.3. Compute Y_{T+1|T} = E(Y_{T+1} |Y_{T}, Y_{t - 1}, . . . . ).

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