Question: (a) Consider an AR(1) model yt ryt1 vt; jrj < 1 Rewrite y as a function of lagged errors. (Hint: perform recursive substitution.)

(a) Consider an AR(1) model yt ¼ ryt1 þ vt; jrj < 1 Rewrite y as a function of lagged errors. (Hint: perform recursive substitution.)

What is the mean and variance of y? What is the covariance between yt and yt2?

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