Question: Suppose that a time series process {yt} is generated by yt = z + et, for all t = 1,2, where {et} is an i.i.d.

Suppose that a time series process {yt} is generated by yt = z + et, for all t = 1,2, where {et} is an i.i.d. sequence with mean zero and variance (2e. The random variable z does not change over time; it has mean zero and variance (2z. Assume that each et, is uncorrelated with z.
(i) Find the expected value and variance of yt. Do your answers depend on t?
(ii) Find Cov(yt, yt+h) for any t and h. Is {yt} covariance stationary?

(iv) Does yt satisfy the intuitive requirement for being asymptotically uncorrelated? Explain.

a(o + o)

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