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Stat4005: Time Series: T I 0 I T T 2

This document contains exercises and examples for time series analysis using autoregressive (AR) and moving average (MA) models. It introduces the concepts of stationarity, causality, and invertibility for time series models. Examples include AR and MA models of various orders, expressing models in different forms, and identifying the types and properties of given models. Strategies are provided for converting between AR and MA representations and using the Yule-Walker equations.

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Tszkwan Yu
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137 views

Stat4005: Time Series: T I 0 I T T 2

This document contains exercises and examples for time series analysis using autoregressive (AR) and moving average (MA) models. It introduces the concepts of stationarity, causality, and invertibility for time series models. Examples include AR and MA models of various orders, expressing models in different forms, and identifying the types and properties of given models. Strategies are provided for converting between AR and MA representations and using the Yule-Walker equations.

Uploaded by

Tszkwan Yu
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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STAT4005: TIME SERIES

TUTORIAL 3: AR Model

Michael Mun Lau, Cheung


Department of Statistics, The Chinese University of Hong Kong
Week 4, 2018 Semester 2

P∞ i
Exercise MA(∞) Consider the process Yt = [ i=0 (0.8B) ] Zt , where {Zt } ∼ N (0, σ 2 ).
a) Find E(Yt ) and V ar(Yt ).
b) Find the autocovariance function of {Yt }.
c) Find the autocorrelation function of {Yt }.
d) Is Yt weakly stationary?

1
i.i.d.
Exercise AR (1) Let Yt = 0.8Yt−1 + Zt , where Zt ∼ N (0, σ 2 ).
a) Find P
the values of ψ0 , ψ1 and ψ2 if the above process is written in the form of MA model
Yt = ∞ j=0 ψj Zt−j .

b) Find the values


P∞ of ψj , j = 0, 1, 2, . . . if the above process is written in the form of MA
model Yt = j=0 ψj Zt−j .
c) Find the autocovariance function of Yt by Yule-Walker Equation.
d) Is Yt stationary?

2
STRATEGY

1) AR format ⇔ MA format 2) Yule-Walker equation

i.i.d.
Motivation Let Yt = 2Yt−1 + Zt , where Zt ∼ N (0, σ 2 ).
a) Try to express Yt in the form of ∞
P
j=0 ψj Zt−j with all |ψ| < ∞.

b) Try to express Yt−1 in the form of ∞


P
j=0 ψj Zt−1+j with all |ψ| < ∞.

c) Is Yt stationary? Yt is not causal!

3
Exercise AR (2) Let (1 − 1.1B + 0.24B 2 )Yt = at , where {at } ∼ W N (0, σ 2 ).
a) Find P
the values of ψj , j = 0, 1, 2 if the above process is written in the form of MA model
at = ∞ j=0 ψj at−j .

b) Find the values


P∞ of ψj , j = 0, 1, 2, . . . if the above process is written in the form of MA
model Zt = j=0 ψj at−j .
c) Find ACF ρ1 and ρ2 of Yt .
d) Is Yt stationary? Is Yt causal?

4
Exercise MA (2) Let Xt = at − 0.4at−2 , where {at } ∼ N (0, σ 2 ).
a) Find the values
P∞ of φj , j = 0, 1, 2, 3, . . . if the above process is written in the form of AR
model at = j=0 φj Xt−j .
b) Is Xt stationary? Is Xt causal? Is Xt invertible?

MODEL IDENTIFICATION

Suppose {at } is white noise sequence, types of model:

• MA(q): Xt = at + φ1 at−1 + · · · + φq at−q

• AR(p): Xt + ψ1 Xt−1 + · · · + ψp Xt−p = at

• ARI(p,d): (1 − B)d (Xt + ψ1 Xt−1 + · · · + ψp Xt−p ) = at

AR or MA characteristic equation

• AR polynomial: 1 + ψ1 B + · · · + ψp B p ⇒ AR equation: 1 + ψ1 x + · · · + ψp xp = 0

• MA polynomial: 1 + φ1 B + · · · + φp B p ⇒ MA equation: 1 + φ1 x + · · · + φp xp = 0

• Relationship between ROOTS & polynomial FACTORIZATION:


• ROOTS = r1 , r2 , . . . , rn ⇔ Polynomial = (1 − r1−1 B)(1 − r2−1 B) . . . (1 − rn−1 B)

5
DEFINITIONS

A model Xt is Stationary if it can be written as Xt = ∞


P
• k=−∞ ψk at−k , with
all ψ < ∞ and {at } is white noise. !!! Can have future white noise !!!
• CHECK: All roots in AR characteristic equation: |x| =
6 1

A model Xt is Causal if it can be written as Xt = ∞


P
• k=0 ψk at−k , with
all ψ < ∞ and {at } is white noise. !!! Only past white noise !!!
• CHECK: All roots in AR characteristic equation: |x| > 1

A model Xt is Invertible if it can be written as ∞


P
• k=0 ψk Xt−k = at , with
all ψ < ∞ and {at } is white noise. !!! Past observations !!!
• CHECK: All roots in MA characteristic equation: |x| > 1

i.i.d.
Exercise Given at ∼ N (0, 1). Identify the following models (state the type and the order
of the models) and state whether the models are stationary, causal and invertible.
a) Zt = 1.4Zt−1 − 0.4Zt−2 + at
b) Zt = −0.5Zt−1 + 0.14Zt−2 + at
c) Zt = at − 3at−1 + 3at−2 − at−3
d) Zt = 2at − 2.2at−1 + 0.5at−2

-THE END-

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