Question: Please see the attached pic below. 4. Let {Yt} be a stationary process with mean zero and let a, b and c be constants. Let
Please see the attached pic below.

4. Let {Yt} be a stationary process with mean zero and let a, b and c be constants. Let st be a seasonal component with period 4, that is, St = St+4, t = 1, 2, ..., and Xt = a + bt + ct2 + st + Yt. (i) For process X, eliminate seasonality first and trend second, that is, let (do, so) = min{(d, s) such that d, s 2 0, and the process Wt := VIV,Xt = (1 - B)(1 - B ) Xt is stationary}. Find do and so. (ii) For process X, consider elimination of trend first: Let (d1, s1) = min{(d, s) such that d, s 2 0, and the process Vt := Vs VXt = (1 - B$) (1 - B)Xt is stationary}. Are the values (d1, s1) the same of different from (do, so) found in (i)? (iii) Based on your answers for (i) and (ii), what is your conclusion: to make X stationary, should one first eliminate seasonality, as in W, or first eliminate the trend as in V
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
