{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

pqf2 - Econ 410 Introduction to Econometrics Practice...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ 410 - Introduction to Econometrics Practice Questions for the Final Exam II 1. Assume that Y t follows the random walk model with drift: Y t = β 0 + Y t 1 + u t where E ( u t | Y t 1 , Y t 2 , ... ) = 0 and u t is a stationary random variable with var ( u t ) = σ 2 u for every t = 1 , .... T. You know that the process for Y t can be rewritten as: Y t = β 0 + Y t 1 + u t = β 0 + β 0 + Y t 2 + u t 1 + u t = β 0 + β 0 + β 0 + Y t 3 + u t 2 + u t 1 + u t = ...... = 0 + t X j =1 u j (assuming Y 0 = 0 ). (a) Compute E ( Y t ) ; is this value constant over time? (b) Compute var ( Y t ) ; is this value constant over time? (c) Compute cov ( Y t , Y t j ) ; is this value constant over time? (d) Now consider the process followed by the fi rst di ff erence of Y t : Y t = Y t Y t 1 = β 0 + u t Compute E ( Y t ) ; is this value constant over time? (e) Compute var ( Y t ) ; is this value constant over time? (f) Compute cov ( Y t , Y t j ) ; is this value constant over time? (g) From a. c. , can you say that Y t is stationary? From d. f. , can you say that Y t is stationary? 2. You estimated the following AR (2) model from a sample of 10000 observations: b Y t = 18 . 34 (4 . 81) + 1 . 37 (0 . 12) Y t 1 + 0 . 37 (0 . 13) Y t 2 t 1 R 2 = 0 . 42 Assume that all the time series regression assumptions hold.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern