Does first differencing reduce autocorrelation? Consider the models yt = 'xt +t, where t = t1 +
Question:
Does first differencing reduce autocorrelation? Consider the models yt = β'xt +εt, where εt = ρεt−1 + ut and εt = ut − λut−1. Compare the autocorrelation of εt in the original model with that of vt in yt − yt−1 = β'(xt − xt−1) + vt, where vt = εt − εt − 1.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 50% (10 reviews)
For the first order autoregressive model the autocorrelation is p Consider the first difference v 1 ...View the full answer
Answered By
Branice Buyengo Ajevi
I have been teaching for the last 5 years which has strengthened my interaction with students of different level.
4.30+
1+ Reviews
10+ Question Solved
Related Book For
Question Posted:
Students also viewed these Econometric questions
-
Does first differencing reduce autocorrelation? Consider the models y t = 'x t + t , where t = t1 + u t and t = u t u t1 . Compare the autocorrelation of t in the original model with that of v t...
-
Consider the bivariate system Xt = Xt-1 + vt Yt = Xt + t where vt and t are each independently distributed with mean zero and variance 2. Develop an expression for Yt - Yt-1, and show that X and Y...
-
Consider Zt = ertXt where Xt is an exponential Wiener process: Xt = eWt (a) Calculate the expected value of the increment dZ(t). (b) Is Zt a martingale? (c) Calculate E[Zt]. How would you change the...
-
The following data relating to direct materials cost for August of the current year are taken from the records of Happy Tots Inc., a manufacturer of plastic toys: Quantity of direct materials used...
-
You are exploring the possibility of starting a project involving production of an assortment of spicy curried pickles. You had approached a marketing consultant to conduct market research and do a...
-
The Whitt Window Company, a company with only three employees, makes two different kinds of hand-crafted windows: a wood-framed and an aluminum-framed window. The company earns $300 profit for each...
-
Determine the CTE for a randomly oriented fiber composite in terms of the longitudinal and transverse CTEs \(\alpha_{1}\) and \(\alpha_{2}\) of the corresponding unidirectional composite lamina.
-
Jaffa Company prepared its annual financial statements dated December 31, 2014. The company applies the FIFO inventory costing method; however, the company neglected to apply LCM to the ending...
-
1. What have been some of the economic impacts of the war in Ukraine on theRussian economy? (Discuss at least 2 different impacts) 2. Discuss two reasons why global food shortages may occur as a...
-
Richard chooses technique 0 and 2 requiring 10+10-20 efforts and provising 10+11=21 benefits. Hence, 21 is returned as the output Example 2: input1: 3 input2: (10,10,10,10) input3: (10,11,12,15)...
-
(This exercise requires appropriate computer software. The computations required can be done with RATS, EViews, Stata, TSP, LIMDEP, and a variety of other software using only preprogrammed...
-
Derive the disturbance covariance matrix for the model ?What parameter is estimated by the regression of the OLS residuals on their lagged values? y ; = x + E = pr1 + 1 - 21-1-
-
People Able Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. People Able has three divisions, each of which is located in a different country: a. China...
-
We can model the motion of a dragonfly's wing as simple harmonic motion. The total distance between the upper and lower limits of motion of the wing tip is \(1.0 \mathrm{~cm}\). The wing oscillates...
-
A woman wearing an in-ear hearing aid listens to a television set at a normal volume of approximately \(60 \mathrm{~dB}\). To hear it, she requires an amplification of \(30 \mathrm{~dB}\), so the...
-
Bats are sensitive to very small changes in frequency of the reflected waves. What information does this allow them to determine about their prey? A. Size B. Speed C. Distance D. Species As discussed...
-
When the heart pumps blood into the aorta, the pressure gradient-the difference between the blood pressure inside the heart and the blood pressure in the artery-is an important diagnostic...
-
The mass in a pendulum clock completes one complete swing in \(1.00 \mathrm{~s}\). What is the length of the rod?
-
If you pour whisky over ice, the ice will cool the drink, but it will also dilute it. A solution is to use whisky stones. Suppose Ernest pours 55 g of whisky at 22C room temperature, and then adds...
-
At Glass Company, materials are added at the beginning of the process and conversion costs are added uniformly. Work in process, beginning: Number of units Transferred - in costs Direct materials...
-
What did all four modes of production have in common? How was socialism different in Marxs mind?
-
Adata set consists of n observations on X n and y n . The least squares estimator based on these n observations is b n = (X' n X n ) ??1 X' n y n . Another observation, x s and y s , becomes...
-
Suppose that you estimate a multiple regression first with, then without, a constant. Whether the R 2 is higher in the second case than the first will depend in part on how it is computed. Using the...
-
Three variables, N, D, and Y, all have zero means and unit variances. A fourth variable is C = N+ D. In the regression of C on Y, the slope is 0.8. In the regression of C on N, the slope is 0.5. In...
-
How do Software-Defined Networking (SDN) and Network Functions Virtualization (NFV) paradigms transform traditional network architecture, and what challenges might arise when implementing these...
-
The pension fund you manage must make a payment of $250,000 in ten years. The ten-year interest rate is currently 8% per annum. You want to fund this liability using five-year zero-coupon bonds and...
-
A 1-year zero coupon bond has a YTM of 10%. A 2-year zero coupon bond has a YTM of 12%. Both are riskless. What is the price of a 2-year, annual 5% coupon paying bond with face value of $1,000?
Study smarter with the SolutionInn App