7. Develop a simulation similar to the one in Section 20.5 with 0.65 < R2 < 0.85.

Use theARMA(m,l) structure belowand pick your own parameters for the periodic functions.

(i) Simulate the data with n = 3200.

(ii) Perform a hypothesis test for the slope coefficient, based on a filtered model.
(iii) Form a random sample of 283 observations from the original 3200.
(iv) Perform a hypothesis test for the slope coefficient, based on a filtered model.
Your class results can be pooled to get an overall assessment of the reliability of filtering in this context.
ARMA(m,l) structures:

(a) (1 − 0.7B) (1 + 0.1B) ????n = (1 − [0.4 + 0.4i] B)(1 − [0.4 − 0.4i] B)wn

(b) (1 − [0.7 + 0.1i]B) (1 − [0.7 − 0.1]B) ????n = (1 − 0.6B)(1 − 0.3B)wn