If a time series is covariance stationary, Delta X_t = -0.0405 - 0.4674 Delta X_t-1, what is the Mean reverting level? Hint: Mean reverting level = b_0/(1-b_1).
hmmm… didn’t think that was too difficult. Also, this kind of question has popped up in many places.
Give us a clue???
-.0276???
good for you…that got me the first time, as I used b1=0.4674
Dreary - can you show the full calculation?
just plug -0.0405 / 1- ( - 0.4674)
(-)0.0405/ (1-(-)0.4674) watchout for the signs: (-)0.0276
ha, signs were killing me…thanks guys