Question

The time series {$y_{t}$} is said to be an AR(2) process if $y_{t} = \lambda _{1}y_{t-1} &plus; \lambda _{2}y_{t-2} &plus; \varepsilon _{t}$ , where {$\varepsilon _{t}$} is a white noise process with variance $\sigma ^{2}$ < $\infty$

a) For what values of $\lambda _{1}, \lambda _{2}$ is the process weakly stationary?

b) Select $\lambda _{1}, \lambda _{2}$ in the range where the process is weakly stationary and plot the autocorrelation function for the chosen $\lambda _{1}, \lambda _{2}$

Answer 1