pqf2 - Econ 410 - Introduction to Econometrics Practice...

Info iconThis 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 f rst di f 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
Background image of page 1

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

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

This note was uploaded on 07/28/2010 for the course ECON 410 taught by Professor Staff during the Fall '08 term at University of Wisconsin.

Page1 / 2

pqf2 - Econ 410 - Introduction to Econometrics Practice...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online