Question: Consider the following MA (1) process yt = 2.3 -0.95t1 + t, t i.i.d. N(0,1) Given a quadratic loss function, calculate the optimal forecast

Consider the following MA (1) process
yt = 2.3 -0.95εt–1 + εt, εt → i.i.d. N(0,1)
Given a quadratic loss function, calculate the optimal forecast for h = 1, 2, 3, variance of the forecast error and density forecast. Your information set contains information up to time /. It may be useful to know that εt = 0.4, ε1–2 = – 1.2.

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The optimal forecasts for h 1 2 3 are f t 1 23 095 t 23 095 x 04 192 f t 2 ... View full answer

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