AR(2) process. (a) For the one-way error component model with remainder disturbances (u_{i t}) following a stationary
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AR(2) process.
(a) For the one-way error component model with remainder disturbances \(u_{i t}\) following a stationary \(\operatorname{AR}(2)\) process as in (5.16), verify that \(\Omega^{*}=E\left(u^{*} u^{* \prime}ight)\) is that given by (5.18).
(b) Show that \(y^{* *}=\sigma_{\epsilon} \Omega^{*-1 / 2} y^{*}\) has a typical element given by (5.19).
Transcribed Image Text:
Vit = P1Vi,t-1 + P2Vi,t-2 + Eit (5.16)
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