ARMA Models - Definitions and Stochastic Properties - ARMA Models - AR e.g. AR

5 important questions on ARMA Models - Definitions and Stochastic Properties - ARMA Models - AR e.g. AR

Explain how/why the stable AR(1) process is restrictive, compared to the Wold decomposition

Abc

What is the "stability condition"?

stability condition = |ϕ| < 1

For a stable AR(1) model, which moments change over time?

None of them.
  • Higher grades + faster learning
  • Never study anything twice
  • 100% sure, 100% understanding
Discover Study Smart

What is the stationarity lemma, and what is its significance?

Stationarity lemma = Stability implies stationarity
Its significance is that it makes deriving the unconditional moments (mean, variance and autocovariance) easier

Assuming the stationarity lemma, derive the simple variance of an AR(1) model

See image

The question on the page originate from the summary of the following study material:

  • A unique study and practice tool
  • Never study anything twice again
  • Get the grades you hope for
  • 100% sure, 100% understanding
Remember faster, study better. Scientifically proven.
Trustpilot Logo