Answer to Question #269563 in Economics for MCM

Question

1. Suppose that Yt follows the Moving Average process of order 1 (MA(1)) model Yt=ϵt−θϵt−1, where ϵt is i.i.d. with E(ϵt)=0 and Var(ϵt)=σϵ2 .

a) Compute the mean and variance of Yt

b) Compute the first two autocovariances of Yt

c) Compute the first two autocorrelations of Yt

Answer 1

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