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Math Help - stats problem

  1. #1
    Senior Member sfspitfire23's Avatar
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    stats problem

    Hey guys,

    Given the AR(2) process 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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  2. #2
    Moo
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    A Cute Angle Moo's Avatar
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    Hello,

    The characteristic polynomial is just \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.
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