Thread: Time Series: ARCH model properties

(NOTE: also under discussion in sos Math Cyberboard)

Hello,

First equality : because depends on , so is independent from , since the Zt are iid, and hence the equality (that's a common property).

Second equality : same stuff, Xt is independent of all these Zt's, because it depends on Zt.

Third equality : ditto

Originally Posted by Moo

Hello,

First equality : because depends on , so is independent from , since the Zt are iid, and hence the equality (that's a common property).

I think you're trying to say that Z_t and X_{t-1} are independent since X_{t-1} is a function of only Z_{t-1} , Z_{t-2}, ..., etc. and Z_i s are iid.

But now my question is: Why is X_{t-1} is function of ONLY Z_{t-1}, Z_{t-2},... ? How can we prove this?
The trouble is I think X_{t-1} a function of Z_{t-1}, Z_{t-2},... AND some σ_j.

Thanks!

Yeah sorry I probably got messed up with the variables' names, well it seems like you understand what I meant

Well to see it, you can say that is -measurable (the first sigma is "sigma-algebra generated by...")
is -measurable, etc... So in the end, by independence of the Zt's, (independence).
If you want to prove it, you can just use induction, but it's not necessary in your exercise