helphelp93
New member
- Joined
- May 27, 2015
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- 2
Given two equations Yt=Yt-1 + Et with Y0=0, the expectation is constant, correct? However, the variance isn't constant. Is this because we have a lag? Why? Can you provide a mathematical explanation please?
However, Yt=(1/2)Yt-1 + Et has a constant variance. Maybe this is more of an algebra question but this leaves me totally confused. The solutions say that this is because we have a geometric series, which I understand as being 1/2^2 infinitely, right? I need help understanding this. Why does this make the variance constant? Anytime we have something like Yt-1 or Yt-2, will the variance be constant if it is being multiplied by a constant?
Thank you!
However, Yt=(1/2)Yt-1 + Et has a constant variance. Maybe this is more of an algebra question but this leaves me totally confused. The solutions say that this is because we have a geometric series, which I understand as being 1/2^2 infinitely, right? I need help understanding this. Why does this make the variance constant? Anytime we have something like Yt-1 or Yt-2, will the variance be constant if it is being multiplied by a constant?
Thank you!