Unformatted text preview: 2 , σ . a. Under what conditions is Y t a weakly stationary random variable in each of the above models? b. Give an example of how each type of model might arise in practice. c. For the case p = 1 : (i) Describe and justify a large sample estimation method for model (1), and consider the consequences of applying it if (2) is the true model. (ii) Describe how you would estimate (2) in large samples, and outline the consequences if (1) is the true model. d. Given sample observations Y t ,X t ,t = 1,. ..,n, and a forecast of X n + 1 , denoted X n F + 1 , what are the optimal forecasts of Y n+1 from models (1) and (2) with p = q = 1?...
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- Fall '08
- Economics, Maximum likelihood, Estimation theory, maximum likelihood estimators, Lagrange multiplier principle, consistent initial values