Question: 12.1 (a) Considera n AR(l) model lt : Plt-l t vt' lPl < 1 Rewrite y as a function of lagged enors. (Hint; perform recursive

12.1

(a) Considera n AR(l) model lt : Plt-l t vt' lPl < 1 Rewrite y as a function of lagged enors. (Hint; perform recursive substitution.)

What is the mean and variance of y? What is the covariance between y, andyr_2?

(b) Consider a random walk model J t : ! t : | _ v t Rewrite y as a function of lagged errors. What is the mean and variance of y?
What is the covariance between y, and y,_2?

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