Question: Simulate the following model pt = t1+ t. Assume that e, is a normally distributed random variable t N (0, 2) and consider different

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?

Step by Step Solution

★★★★★

3.40 Rating (163 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

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

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

728-B-E-E-P (1530).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

The following regression model was estimated to explain the annual sales from a direct marketing campaign: where St = $ sales in year t Pt = $ promotional expenditure in year t Mt = $ product mailing...

Financial analysts often use the following model to characterize changes in stock prices: where P0 = current stock price Pt = price at time = mean ( logarithmic) change of the stock price per unit...

Simulate the model pt = 14.3 x 0.45 + 0.55pt1 + t Assume that t is a nor-mally distributed random variable t N(0, 2) and consider different values for the variance 2 = 0.25, 1, 2. In the three...

Question 1 (1 point) 1. What is the correct expression for the following sum in summation notation? Xzy4 + X3V6 + X4Ve + XV10 + X6V12 + X7)14 O a) IM X2iVi Ob) Xjy zi Odr Xziyi 1=1 O d) IM- *; y zi...

Is there help or advice for the following project on Classical Probability and Statistics Problems and Bootstrap Estimation. R studio project attached upload must have both the html (produced by...

Suppose that the present day every day volatilities of asset A and asset B are 1.6% and 2.5%, respectively.The costs of the assets at close of trading the day prior to this had been $20 and $40 and...

Solve the following attachments (3-) Suppose the effort level chosen by the agent is observable by the principal. A wage contract then species an effort level (61 or cg), and an outputcontingent wage...

Suppose you want to test whether grades are different between students who took Econ 202 (population 1) and Stats 100 (population 2). You randomly collect grades from 40 past Econ 202 students and 40...

28. Which of the following statements does not apply when the hypothesis test leads to a statement such as: "Mean scores obtained by third grade students at James Public School are statistically...

1 Use the following sample data to find the mean, 10 pts :1, 0, 2, 3, 7, 10, 10 (Round answer to one decimal position.) Question 2 10 pts Use the following sample data to find the median: 1, 0, 2, 3,...

Estimate how many days it would take to walk around the world, assuming 10h walking per day at 4 km/h

Edmonton Chemical Company manufactures two industrial chemical products in a joint process. In May, 10,000 gallons of input costing $180,000 were processed at a cost of $450,000. The joint process...

The capacity of a production unit can be expressed in terms of _____________or output. a. Resources b. Input c. Cost d. Quality

How can a firm control disbursements so that if a duplicate invoice is sent by the supplier the payment will not be made a second time?

Use the accompanying graphs to illustrate the effects of imposing a tariff on imports on the domestic price, the domestic quantity purchased, the domestic quantity produced, the level of imports,...

Using the accompanying graphs, illustrate the effects of opening up the domestic market to international trade on the domestic price, the domestic quantity purchased, the domestic quantity produced,...

Explain why imposing a tariff causes a net welfare loss to the domestic economy.

Use the data in the tables below to answer the following questions: Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017. Average Premium (Extra return versus...

A project that costs $2,200 to install will provide annual cash flows of $720 for each of the next 5 years. a. Calculate the NPV if the opportunity cost of capital is 10%? (Do not round intermediate...

QUESTION 6 A firm that earns $1 million before tax in Brazil pays Brazilian tax of $250,000 and remits the remaining $750,000 as a dividend to its U.S. parent. It pays a 5% dividend withholding tax...