Question: 9.4 Consider the model e t : p e t ] + v t (a) Suppose p : 0.9 and ol: 1. What is (i)

9.4 Consider the model e t : p e t ] + v t

(a) Suppose p : 0.9 and ol: 1. What is

(i) the correlation between !1 x\d e1-y,

(ii) the correlation between e1 and es-4,

(iii) the vanance of,?

(b) Repeat part

(a) with p : 0.4 and o? : l. Comment on the difference between your answers for parts

(a) and (b).

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