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hw5-2012

# hw5-2012 - CORNELL UNIVERSITY STSCI 4550 ILRST 4550 ORIE...

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CORNELL UNIVERSITY STSCI 4550 / ILRST 4550 / ORIE 5550 Applied Time Series Analysis, Spring 2012 Professor David S. Matteson Assignment #5 Due: Wednesday, March 14 1. Consider the monthly simple return of CRSP Decile 1 portfolio from January 1988 to December 2007. The data are in m-dec1n10.txt (date, Decile-1 return, and Decile-10 return) (a) Plot the time series, ACF, PACF and comment. (b) Fit an MA(1) model to the series. Write down the ﬁtted model. (c) Compute 1-step to 4-step ahead forecasts of the ﬁtted MA(1) model using the last observation as the forecast origin. Write down the forecasts and their standard errors. Why are the 2-step to 4-step forecasts the same? (d) Fit an AR(1) model to the series. Write down the ﬁtted model. (e) Compute 1-step to 4-step ahead forecasts of the ﬁtted AR(1) model again using the last observation as the forecast origin. Write down the forecasts and their standard errors.
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