Simulate the following model pt t1 t Assume that e, is a normally distributed random variable t N (0, 2) and consider different values for the parameter 0 4, 0 4, 0 7 0 7 In each of the four cases, plot the resulting time series of pt and compute its autocorrelation functions Compare your results w...

In Figures 15 17 19 and 21 we plot 100 observations of the time series of a simulated MA 1 process f ...

Simulate the following model pt = t1+ t. Assume that e, is a normally distributed random variable

Question:

Simulate the following model ∆pt = θεt–1+ εt. Assume that e, is a normally distributed random variable εt → N (0, σ2) and consider different values for the parameter θ = – 0.4, 0.4, -0.7. 0.7. In each of the four cases, plot the resulting time series of ∆pt and compute its autocorrelation functions. Compare your results with those of Figure 5.7. What difference does it make when θ is negative or positive?