Question: QUESTION 3 Consider the AR(1) process: y, = do+ qiyi+ ,, where &, is white noise. a). Define weak (covariance) stationarity and determine under what

QUESTION 3 Consider the AR(1) process: y, = do+ qiyi+ ,, where &, is white noise. a). Define weak (covariance) stationarity and determine under what conditions the AR(1) model above is stationary. (10 Marks) b). Derive the ACF of the model and comment of its shape. (10 Marks) c). Given your answer in (b), what would be the shape of the PACE? (5 Marks) (Total: 25 Marks)

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