Time series analysis and applications

Homework

Please return (in PDF file) by May 24, 2020

Notes:
- Stationary will mean weakly stationary.
- Time series names in blue refer to data provided in the book. To
access those time series (and related R functions) you need to
install the “astsa” package (install.packages("astsa"))
once and load it whenever you need it (library(“astsa”)).
- Questions (Q1, Q2, …) are graded as equivalent.

Q1.Consider the random walk with drift (δ ≠ 0model x t=δ + x t − 1+ wt , for t=1,2 , ⋯,
with x 0=0 , where w t is (zero-mean) white noise with variance σ 2w.
t
(a) Show that the model can be written as x t=δt + ∑ w k , t=0,1,2 , ⋯.
k=1
(b) Find the mean and autocovariance functions of x t .
(c) Argue that x t is not stationary.
t −1
(d) Show that its normalized autocovariance satisfies ρ x ( t − 1, t )=
Comment on this result.
√ t
.

(e) Suggest a transformation to make the series stationary. Prove it.

(f) What if δ =0?
(g) Could you view the given time series model as something different from
random walk? Comment on the properties of such an alternative model.

Q2.The variogram of a time series x t is defined as the function

1
V x ( h ) = E [ ( x t+h − x t ) 2 ]
2
of the lag h=0 , ±1 , ±2 , ⋯.
(a) Show that, if x t is stationary with autocovariance function γ x, then
V x ( h ) =γ x ( 0 ) − γ x ( h ).
(b) Express the result of (a) in terms of the normalized autocovariance, ρ x.
Comment on the values taken by the variogram for small and large lags.
(c) Compute the variogram of the process of Question 1. Comment on its
dependence on h and compare with (b).
(d) Plot the variogram of (c) with δ =0 and δ =0.5, for h=0,1 , ⋯ , 20.
Comment on the appearance of the plot.

Q3.The glacial varve time series, x t , exhibits some nonstationarity that can be
improved by transforming to logarithms and some additional nonstationarity
that can be corrected by differencing the logarithms.

1
 (a) Compare the sample variance of x t over the first half and the second half
of the data. If you see a significant difference, this is called
heteroscedasticity.
(b) Check whether the transformation y t =log x tstabilizes somehow the
variance over the series.
(c) Plot the series x t , y t . Plot the histograms of x t and y t . Do they look close
to normal (Gaussian)?
(d) Plot and compare the sample normalized autocovariances of x t and y t .
(e) Compute the difference ut = y t − y t −1, examine its time plot and sample
normalized autocovariance, and argue that differencing the logged data
produces a reasonably stationary series. Can you think of a practical
interpretation for ut (assuming x t is close to x t −1 )?

Q4.Consider the time series x t=ϕ xt −1 +w t, with ϕ=0.9 and w t (zero-mean) white
noise with variance σ 2w =1.
(a) Is this model causal? Is it invertible? Justify your answers.
(b) Generate a realization of x t of length n=100. Using an estimation
procedure of your choice, estimate the parameters ϕ and σ 2w. Use the
estimated model to predict the future 4 values of the series.
(c) Repeat for a realization of length n=300. Compare with (b).
(d) Derive an expression for the normalized autocovariance function of x t .
Plot this function along with its sample estimate.
(e) Plot the normalized partial autocovariance function of x t . Compare with
(d).

Q5.The sunspotz time series is the biyearly (two measurements per year) sequence
of numbers of sunspots from June 1749 to December 1978, with n=459
samples in total. Perform a spectral analysis of this time series to identify its
predominant periods (say, there are two of them), using:
(a) Raw periodogram
(b) Smoothed periodogram
(c) Periodogram with tapering
(d) Parametric spectral estimation based on an AR model of appropriate order.
Compare the results of the various methods.