1 Consider the following ARIMA(0,1,1) process Et 119 where 0 0 1 and at is a strong white noise with mean zero and variance 1 1 Derive the Beveridge Nelson decomposition of Xt You should find that Xt (1 0) Es 0t (0o Xo) (1) Explain why the Beveridge Nelson decomposition is also know as trend cycle de composition s 1 20 1 2 Assume that Xo and so are constants Show that X, is not covariance stationary 10 1 3 Compute the h steps ahead forecast for Xt 10 1 4 Show that the forecast mean squared error can be written as 1 (h 1)(1 0) 0 10 For each sub question, please explain and comment on your derivations step by step The derivations should explicitly show the logical reasoning behind your solution List the premises and or the assumptions you are using, where necessary

Question: 1. Consider the following ARIMA(0,1,1) process .. = Et + 119 where 0 0 <1 and {at} is a strong white noise with mean

1. Consider the following ARIMA(0,1,1) process .. = Et + 119 where 0 0

Step by Step Solution

★★★★★

3.39 Rating (152 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

11 Derivation of the BeveridgeNelson decomposition To derive the BeveridgeNelson decomposition of Xt we start with the ARIMA011 process equation Xt t t1 The first difference of Xt is equal to the curr... 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

Students Have Also Explored These Related Finance Questions!

Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...

The previous problem demonstrates that removing individual differences can substantially reduce variance and lower the standard error. However, this benefit only occurs if the individual differences...

On January 1 st . 2021, X Company paid $656,000 in cash to acquire 80% of the common shares of the Y Company. Below are the balance sheets of the X Company and Y Company at December 31 st . 2020. X.y...

1. Consider the following snapshot of a system: Process Allocation B 0 1 Max A B 0 0 D D 2 Available B 1 5 1 D 0 PO 2 A 0 1 1 1 P1 P2 0 3 0 5 0 4 7 3 5 5 NOON P3 0 0 6 6 0 3 1 2 4 OON 5 5 P4 6 6...

Math 108: Final Exam, Fall 2017 2/ 10 1. Consider the following matrices: 0 1 1 2 1:1:[752 $],B=[g j,0= 2 3,1):32 3 1 1 0 Evaluate, if possible, If not possible, give reason(s). (a) (5 points) 3A +...

does someone know how to run the code in R? would be great if someone could help me please! also if you do, would be awesome to show the steps since i really wanna know how to do it. It is important...

Task 1 Consider the following first order autonomous nonlinear system. 4(+ 2) *(t) + -x* (t) x(t) = sin(x(t)) 13 Find its equilibrium points (the x points, where i(t) = 0). Hint: try to visualize...

Imagine you are the US Ambassador to a country of your choice. A US ambassador officially represents the US government on behalf of the president, maintains diplomatic relations, and helps to promote...

function LAB04ex1 %NOTE: you CAN run this type of function m file as a script because it requires no inputs. Click the Green arrow above the "Run" tab t0 = 0; tf = 40; %initial and final time y0 =...

Problem 2. Consider the following models (1) yt = 0.7yt-1 +0.68+-1 + Et (2) (1 - B)yt =0.7yt-1 - 0.7yt-2 +0.65+-1 + Et (3) (1 - B* )yt = 0.7y+-1 -0.7y+-5 +0.65-1 + Et(b) If we use notation...

What is asset impairment, and what inherent risk factors are associated with asset impairment?

Draw a PERT chart using the following details. Identify critical path. Activity Depends on Duration (days) A A 7 6 D A 5 E D 10 F 15 G 8 G 8 C 4 G 4 K E,F 5 L 1,H 3

Use the Cauchy criterion for convergence o f a n infinite series t o show that i f n = 1 a n converges a b s o l u t e l y , then i t converges. I s the following function f differentiable a t 0 ? f...

The steel plate shown will support six 50-mm-diameter idler rollers mounted on the plate as shown. Two flat belts pass around the rollers, and rollers A and D will be adjusted so that the tension in...

Figure shows an approximate plot of stress versus strain for a spider-web thread, out to the point of breaking at a strain of 2.00. The vertical axis scale is set by a = 0.12 GN/m2, b = 0.30 GN/m2,...

A 700-N force P is applied at point A of a structural member. Replace P with (a) An equivalent force-couple system at C, (b) An equivalent system consisting of a vertical force at B and a second...

Let H be a Wiener process. Consider the geometric process S again: (a) Calculate dS t . (b) What is the ?expected rate of change? of S t ? (c) If the exponential term in the definition of S t , did...

The fork lift has a weight W1 and center of gravity at G. If the rear wheels are powered, whereas the front wheels are free to roll, determine the maximum number of crates, each of weight W2 that the...

let w(x,y,z)=-2xyarcsin(z)where x=t^4 and y=t^3 and z=6t Calculate dw/dt fy first finding dx/dt and dy/dt and dz/dt and using the chain rule Then use the chain rule to calculate...

Shafts manufactured for use in optical storage devices have diameters that are normally distributed with mean = 0.652 cm and standard deviation = 0.003 cm. The specification for the shaft diameter...

At a certain genetic locus on a chromosome, each individual has one of three different DNA sequences (alleles). The three alleles are denoted A, B, C. At another genetic locus on the same chromosome,...

A sample of 87 glass sheets has a mean thickness of 4.20 mm with a standard deviation of 0.10 mm. a. Find a 98% confidence interval for the population mean thickness. b. What is the level of the...

Is the statement An object always moves in the direction of the net force acting on it true or false? Explain.

In FIGURE Q5.4, block B is falling and dragging block A across a table. How many force vectors would be shown on a free-body diagram of block A? Name them. Figure Q5.4

You toss a ball straight up in the air. Immediately after you let go of it, what force or forces are acting on the ball? For each force you name, (a) State whether it is a contact force or a...