Hi,

I have the following equation:

Rt= c + aRt-1 + vt (1)

where Rt are returns at time t, c is a constant, a is the parameter of returns at time t-1 and vt is an error term at time t.

I need to compute adjusted retruns at time t, that is R adjt, as follows

R adjt = vt /(1-a) (2)

Equation (1) must be estimated recursively. I do not really understand what I should do to estimate that equation recursively.

Any suggestions?

Thank you,

fran