1. FEATURES OF TIME SERIES. Explain general features of economic time series: tr

Question

1. FEATURES OF TIME SERIES. Explain general features of economic time series: trends, cycles, seasonality. (20 marks) 2. STATISTICS AND TIME SERIES. Figure I is the EViews result of hypothesis testing for auto- correlation in the growth rate of the annual working hours per employee in the United States. Is there auto-correlation in the time series? Discuss individual and joint significance of the auto- correlation. (20 marks) 3. ToOLS OF THE FORECASTER. Explain in-sample assessment of the goodness of a model and out-of-sample assessment of the forecasting ability of the model. (20 marks) 4. BASIC MoDEL. (i) Define the following models: AR(p), MA(q) and ARMA(p.g). (ii) State the Wold Decomposition Theorem. (20 marks) 5. LAG OPERATOR. Convert model 1 +0.1Y- + t into an MA model. (10 marks) 6. MoVING AVERAGE PROCESS. How to check the invertibility of an MA(1) model? (10 marks)

Explanation / Answer

Please find below the components of a time series: -

Trends: - Trend is an upward or downward shift in the time series based upon data over a period of time.

Seasonality: - Seasonality refers to regularly repeating patterns of highs and lows. This usually happens during seasons like Chirstmas or Easter, for instance.

Cycles: - Cyclical time series is encountered when we see rises and falls that are not of fixed period. One can think of cycles like in a business we have business cycles. Ideally the duration of such cycles is of 2 years.

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