UNIVERSITY OF ZIMBABWE

TIME SERIES ANALYSIS AND ECONOMETRICS HASTS211

WORKSHEET 5: LD/2023

Attempt ALL Questions

Q1. Let 2.0, 3.0, 2.5, 2.6, 2.9 be a time series from Zt = φZt−1 + at where at ∼ N (0, σa2 ).
Find the estimator of φ.

Q2. Consider an AR(2) model Zt = φ1 Zt−1 + φ2 Zt−2 + at where at ∼ N (0, σa2 ).

(a) Show that ρ1 = φ1 + φ2 ρ1 and ρ2 = φ1 ρ1 + φ2

(b) Find the estimator of φ1 and φ2 .
(c) Given that r1 = 0.936 and r2 = 0.802, calculate φ̂1 and φ̂2 .

Q3. (a) Briefly describe the method of moments procedure of parameter estimation.
(b) Consider an AR(2) model Zt = φ1 Zt−1 + φ2 Zt−2 + at . Use the method of moments
to estimate φ1 and φ2 .
(c) Show that the method of moments is not unique and convenient for an M A(1)
process Zt = at − θat−1 .

Q4. (a) Briefly describe the least square procedure of parameter estimation.
(b) Consider an AR(2) model Zt = φ1 Zt−1 + φ2 Zt−2 + at . Use the method of least
square to estimate φ1 and φ2 .

Q5. A transformation is a modification or operation on the data before analysis.

(a) List 4 types of transformations and explain briefly what each transformation
achieves.
(b) State how you identify the need for a transformation of non-stationary time series
data.

Q6. Consider an AR(1) given by the model

(1 − φB)(Zt − µ) = at

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(a) For µ = 0, find the maximum likelihood estimator of φ and its associated variance.
(b) Find the maximum likelihood estimator of φ and µ when µ 6= 0

Q7. For the following AR(p) process

Zt = φ1 Zt−1 + φ2 Zt−2 + . . . + φp Zt−p + at

(a) Determine the Yule-Walker equations for this process.

(b) Show how the method of moments is used to estimate the parameters φ1 to φp
(c) For an AR(2) model Zt = φ1 Zt−1 + φ2 Zt−2 + at , where at ∼ N (0, σa2 );
(i) show using method of moments that

r1 (1 − r2 ) r2 − r12 )
φ̂1 = and φ̂2 =
1 − r12 1 − r12

(ii) Given that r1 = 0.957 and r2 = 0.799, calculate φ̂1 and φ̂2 .

Q8. Consider an AR(p) model

Zt = φ1 Zt−1 + φ2 Zt−2 + . . . + φp Zt−p + at

(a) Show how the method of moments is used to estimate the parameters φ1 to φp
(b) Show how you can obtain the maximum likelihood estimator of the φ’s and the
variance σa2 for the same process.

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