Mean reverting level for AR(2) model?

CFA Level II
#1

For AR(1), it is b0/(1-b1).

#2

research after the exam please!

#3

… so you don’t think this is part of quant? I hope so, but it looks suspect, and I was tempted t say that it’s the same, i.e., b0/(1-b1), but that wouldn’t make sense.

#4

It is b0/(1-b1-b2). There is an easy way to get this: if X is the mean reverting level, then X = b0 + b1X + b2X. This is a good trick to remember if you have a crisis of confidence about the mean revering level for an AR(1) model on the exam, as well.

#5

photoguy, sounds like a reasonable answer for mean X for any AR§…that’s a good way to remember this formula as well.