Using the data from the fourth problem in Section 11.1 for DOWJONES INDUSTRIALS, estimate an autoregressive model.

Experiment with different values for p-order models until you have what you think is the most justifiable model. Explain your final model.

Compare it with the time series model you estimated in Section 11.1.

Fourth problem in Section 11.1

The Dow Jones Industrial Average is a stock market index created by Wall Street Journal and Dow Jones & Company, co-founded by Charles Dow on May 26, 1896, and now owned by Dow Jones Indexes. The average is named after Dow and one of his business associates, statistician Edward Jones. The index shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market. The “Industrial”

portion of the name is largely historical, as many of the modern 30 components have little or nothing to do with traditional heavy industry.

The 30 stocks that are included in the index and additional information about the DJIA can be found at

http://www.google.com/finance/historical?q=INDEXDJX:.DJI#.