Consider the process where S0 = 0 and {ut : t ∈ Z} is an i.i.d. random variable with N(0,σ2). a) DeterminethemeanandcovariancefunctionoftheprocessSt.Isthisprocessstrictlystationary?Second-order stationary? b) Show that the process Yt = (1 − L)St , t = 1,2,... is strictly stationary. Compute its mean and autocovariance function.

Consider the process where S0 = 0 and {ut : t ∈ Z} is an i.i.d. random variable with N(0,σ2). a) DeterminethemeanandcovariancefunctionoftheprocessSt.Isthisprocessstrictlystationary?Second-order stationary? b) Show that the process Yt = (1 − L)St , t = 1,2,... is strictly stationary. Compute its mean and autocovariance function.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.16P

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Hello. May I ask how did you get the values? Were those only assumed values? Can you also explain how did you make the normal form thoroughly?