Question: Consider the process Xt = 1.1Xt-1 - 0.24Xt-2 + ut - 0.3ut-1, where {ut : te Z} is an i.i.d. N(0, 1) sequence. (a) [10

Consider the process Xt = 1.1Xt-1 - 0.24Xt-2 + ut - 0.3ut-1, where {ut : te Z} is an i.i.d. N(0, 1) sequence. (a) [10 points] Express this process in lag polynomial form, factorize the AR polynomial, identify the process (i.e., ARMA(p, q) model) and comment on stationarity and invert- ibility. (b) [10 points] Based on the identified model in (a), calculate 2-step and 3-step ahead forecast. (c) [5 points] Why forecasting in long horizon is bad

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