# Question

For many time series, particularly prices in speculative markets, the random walk model has been found to give a good representation of actual data. This model is written as follows:

xt = xt-1 + εt

Show that, if this model is appropriate, forecasts of xn+h, standing at time n, are given by

x`n+h = xn (h = 1, 2, 3, c)

xt = xt-1 + εt

Show that, if this model is appropriate, forecasts of xn+h, standing at time n, are given by

x`n+h = xn (h = 1, 2, 3, c)

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