just a refresher on something i had way wrong. Quant. AR models intercept/(1-slope) = mean reverting level. Anytime the current level is ABOVE the mean reverting level, you should expect the next value to be below the last value.
june2009 Wrote: ------------------------------------------------------- > just a refresher on something i had way wrong. > > Quant. AR models > > intercept/(1-slope) = mean reverting level. > > Anytime the current level is ABOVE the mean > reverting level, you should expect the next value > to be below the last value. If you are asking for confirmation, then that is correct.
a random walk has a slope equal to 1 (bi) so random walks have no mean eversting level bo/1-1 therefore non convarience stationary AR model can not be used need to first difference
It should be noted that if b1 is APPROXIMATELY 1, a unit root exists. I’ve been burned on practice questions where b1 was 0.99.