Can you use the mean reversion equation b0/1-b1 if there are multiple variables in an autoregressive equation?
well, b0/(1 - b1) mean reverting level is given for AR(1) process only. Not sure whether there is mean reversion described by a process other than AR(1). At least quick search in google didn’t show up anything appealing.
That’s an interesting question though. Will follow this thread for more info by others.
My mock’s solution says the mean reverting level will be the value where all x variables are the same.
No.
AR(n) models can be mean reverting when n > 1, but the criteria for determining when they’ll converge and when they won’t are (naturally) more complicated than for an AR(1) model.
In any case, it’s beyond the scope of the exam, so stop wasting time here and get back to studying!
S2000magician thank you. could you please give me some resource where I can find more info about it after the exam?