Suppose x1, . . . , xn is a sample from the process xt = + wt .8wt1, where wt wn(0, 2

Suppose x1, . . . , xn is a sample from the process xt = µ + wt − .8wt−1, where wt ∼ wn(0, σ2 w).

(a) Show that mean function is E(xt) = µ.

(b) Use (1.33) to calculate the standard error of ¯x for estimating µ.

(c) Compare

(b) to the case where xt is white noise and show that

(b) is smaller. Explain the result.