Hi all, I'm really confused on this question. I have seen the basic examples of how an AR(3) process can be written in matrix form. I just have absolutely no idea whats going on with this one! how was the matrix formed? Any help is really appreciated Thanks
Hi Andy, sorry i should have said in my question, im looking at part (i), i dont understand how to get those equations into matrix form and can't find anything helpful on youtube! Thanks
Hi Molly As the aim is to have M(Z_t) = N(Z_t-1) + e_t where Z_t = (Xt, Yt), it's probably a good idea for us to rearrange the equations to have terms at time t on the LHS and terms at time t-1 on the RHS. So: Xt - beta Yt = 0.5 Xt-1 + et1 Yt - beta Xt = 0.5 Yt-1 + et2 We can write these two equations in matrix form as: M(Z_t) = N(Z_t-1) + e_t where: M = 1 -beta -beta 1 N = 0.5 0 0 0.5 multiple out the matrix equation to check it's the same. Hope this helps! Andy
