Question 2 Consider the following AR(2) process: zz = do + Q12t-1 + a2zt-2 +...
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Question 2 Consider the following AR(2) process: zz = do + Q12t-1 + a2zt-2 + Et, (1) where Et is a zero-mean white noise process with variance o?, and assume |a1|, |a2|, |au+azl0. Note: No need to derive the exact values! Hint: think about what y-1 and 7-2 mean? (f) (15 marks] Can a linear transformation of the Zt process be represented by an AR(1) process? That is, do appropriate k, do, and 81 constants exist such that the process defined as yt = 24 + k2t-1 satisfies yt = do +819-1 + Et, where Et is a zero-mean white noise process? Explain. Question 2 Consider the following AR(2) process: zz = do + Q12t-1 + a2zt-2 + Et, (1) where Et is a zero-mean white noise process with variance o?, and assume |a1|, |a2|, |au+azl0. Note: No need to derive the exact values! Hint: think about what y-1 and 7-2 mean? (f) (15 marks] Can a linear transformation of the Zt process be represented by an AR(1) process? That is, do appropriate k, do, and 81 constants exist such that the process defined as yt = 24 + k2t-1 satisfies yt = do +819-1 + Et, where Et is a zero-mean white noise process? Explain
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