Hey guys,

Given the AR(2) process $\displaystyle y_t=1+1.3_{y-1}-.4_{y-2}+e$ where e is iid,

is the process stationary? That is, are all unit roots <1?

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- Nov 12th 2010, 04:38 PMsfspitfire23stats problem
Hey guys,

Given the AR(2) process $\displaystyle y_t=1+1.3_{y-1}-.4_{y-2}+e$ where e is iid,

is the process stationary? That is, are all unit roots <1? - Nov 13th 2010, 05:18 PMMoo
Hello,

The characteristic polynomial is just $\displaystyle \phi(x)=1+1.3x-.4x^2$

Find its roots.

For the process to be stationary, you need the roots to be such that their modulus (or absolute value if they're real) to be**different**from 1.

The condition for it to be < 1 is to prove that the process is in canonical form, which is not the same.