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Begin with the AR(1) model as in equation (8.1). a. Take variances of each side of equation (8.1) to show that of(1 - Af) =
Begin with the AR(1) model as in equation (8.1). a. Take variances of each side of equation (8.1) to show that of(1 - Af) = o-, where o? = Vary, and o= = Var E,. b. Show that Cov(y. y-1) = B102. c. Show that Cov(y,, Yet) = Bro2. d. Use part (c) to establish equation (8.2). y, = Bo+ Biyi-I + 51. 1 = 2. . ...T. (8.1) Cov(yr. VIA) Cov(yr. VIA) P = Com(y, y)= (8.2) Var(y ) Var(y-*)
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