{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

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

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

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.

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• 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.

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

• 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.

Dana University of Pennsylvania ‘17, Course Hero Intern

• 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.

Jill Tulane University ‘16, Course Hero Intern