Unformatted text preview: Such a nonstationary series is termed homogeneous. The number of times that the original series must be differenced before a stationary series results is called the order of homogeneity. 3. Consider the model y t = α + ε t ε t = ρε t1 + u t , where ρ < 1 and {u t } is an i.i.d. sequence with known density g(u t ) that is centered at the origin. Show that the OLS estimator of α is unbiased and consistent. Derive the bias in the OLS standard errors and show the direction of the bias when ρ > 0....
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 Fall '08
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 Economics, Signal Processing, Estimation theory, εT, Kalman filter

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