Examples of Stationary Processes 1) Strong Sense White Noise: A process t is strong sense white noise if t is iid with mean 0 and nite variance 2. 2) Weak Sense (or second order or wide sense) White Noise: t is second order stationary with E(t) = 0 and Co
Estimation of ARMA Models
April 6, 2005
Maximum Likelihood Estimation of ARMA Models
For iid data with marginal pdf f (yt ; ), the joint density function for a sample y =
(y1 , . . . , yT ) is simply the product of the marginal densities for
1) Using Eviews (le named return.wf1), plot the ACF and PACF function for
the series returns. Identify the series.
2) Read the paper Do we really know that nancial markets are ecient? by
Lawrence H. Summers.
i) Derive the theoretical autocor