2 2 Suppose That The Daily Log Return Of A Security Follows The Model R 0 01 0 2r 2 A Where A Is A Gaussian 1 (27.75 KiB) Viewed 25 times
2 2 Suppose That The Daily Log Return Of A Security Follows The Model R 0 01 0 2r 2 A Where A Is A Gaussian 2 (27.75 KiB) Viewed 25 times
2.2. Suppose that the daily log return of a security follows the model r = 0.01 +0.2r,-2 + a₁, where {a,) is a Gaussian white noise series with mean zero and variance 0.02. What are the mean and variance of the return series r? Compute the lag-1 and lag-2 autocorrelations of r₁. Assume that r100 = -0.01, and r99 = 0.02. Compute the 1 and 2-step-ahead forecasts of the return series at the forecast origin = 100. What are the associated standard deviations of the forecast errors?
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