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  • q4 and q5) Covariance and Variance Decomposition

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    Tokir Alam
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    1. This document discusses time series analysis and variance decomposition. 2. It shows that the variance of Y can be decomposed into the expected variance of Y given X plus the variance of X times the expected value of Y given X. 3. As an example, it calculates the variance of Yt as 0.2, which is equal to the expected variance of Yt given Xt plus the additional variance term.

    Original Description:

    Solution: Variance and Covariance decomposition from econometrics

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    1. This document discusses time series analysis and variance decomposition. 2. It shows that the variance of Y can be decomposed into the expected variance of Y given X plus the variance of X times the expected value of Y given X. 3. As an example, it calculates the variance of Yt as 0.2, which is equal to the expected variance of Yt given Xt plus the additional variance term.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    8 views5 pages

    q4 and q5) Covariance and Variance Decomposition

    Uploaded by

    Tokir Alam
    1. This document discusses time series analysis and variance decomposition. 2. It shows that the variance of Y can be decomposed into the expected variance of Y given X plus the variance of X times the expected value of Y given X. 3. As an example, it calculates the variance of Yt as 0.2, which is equal to the expected variance of Yt given Xt plus the additional variance term.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 5

    Time Seiu aralytis -

    P 201

    ta 1 PCKE)

    0.1 0-5
    0

    4 0 6

    1.0
    0 5 0.5
    PCY

    it t0..
    shorge . .

    P CY)
    0.1 05

    D5
    ta-1

    0 5 05
    P ()
    Thua:
    P(Xx44) PY 8)
    0 5 0 5

    a-1 0'5
    0

    0x 0.5 + IxD 5 05
    Thus, EUX) =
    0 ND S 0.5
    EC)= 0 +

    JUue khout that Jov. (Xt, ¥e) = E(%Yt) E(XE) EC)

    ECt. Yr) 0a O% 0.y +Dxlx 0.1 01 0.1

    Thua (Xp Yp) 04-0-5x DS)


    04 0 a5
    0 15
    89. Vari an ce DecmpeiKon, kERRY
    :
    PA1TERSON po

    Vat (Y) Ex ] Von (Y+/ X)+ Van x E (Yel xt)t

    0 a PCYE)

    O1 03

    04 0 3 0

    P) 0.6 0

    Caluulate Vouone o Ye, Vor(Yt)


    PCYe) YPC)
    0 3
    0 3

    Vov CYe)ER) -(E(Y))

    CLY)0%0:3 + O 0.+

    x0'3 IX0 0
    ECY)=

    Vm Cyt) 0+(o49) = 0.2


    h x u)- (o-)+(-(4)

    .
    (%/-ta- (o-4%(4)- (1-)
    1
    Thous
    Ex(Voae/ KE ))E ndih'snal, Voriuno is a RV Aui

    erm2 tnd ad

    pruslauUhea a0 (prb( 1 )
    Ourd 0.4 (p%. (Ke ra)).

    Ths
    tx(von (Yt1 4+)) - xo-6 t

    = 0 2083

    expebikas hoa tuo


    Vo xCx (Y-/Xr)) andihenal

    ovE@nw

    6)+ (o-) ( - 0-9) (o-) (3- -


    &(6)o
    0.0 0164
    ( 0+)

    Thus
    (tM))
    |Van Y Ex |ea(Yr/))r Voí,
    0.21 0.2o ?3 + O 0017

    LHS H S

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