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Q129Section III (Statistics)129 of 145

Started at 0, the AR(1) has mean μ1−ϕt1−ϕ\mu\frac{1-\phi^t}{1-\phi} and variance 1−ϕ2t1−ϕ2\frac{1-\phi^{2t}}{1-\phi^2}

Let Xt=μ+ϕXt−1+ZtX_t=\mu+\phi X_{t-1}+Z_t where Zt∼Z_t\sim iid Normal (0,1)(0,1), the process started at time 0 with X0=0X_0=0. Which statements are correct? (i) Xt=1−ϕt1−ϕμ+∑j=1tϕt−jZjX_t=\frac{1-\phi^t}{1-\phi}\mu+\sum_{j=1}^t\phi^{t-j}Z_j; (ii) E(Xt)=μE(X_t)=\mu; (iii) V(Xt)=11−ϕ2V(X_t)=\frac1{1-\phi^2}.

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