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Timotheus Darikwa
SSTA031: Time Series Analysis
University of Limpopo
Intro
• For MA(q) models the autocorrelation function is
zero for lags beyond q
E t2 2 t t 1 2 t21
1 2 2
E Yt Yt 1 E t t 1 t 1 t 2
E t t 1 t21 t t 2 2 t 1 t 2
2
E Yt Yt k 0
for k>1
MA(1)
• Covariance stationary
– Mean and autocovariances are not functions of time
• Autocorrelation of a covariance-stationary
process k
k
0
• MA(1) 2
1
1
2 2
1 2
Autocorrelation Function for MA(1):
Yt t 0.8 t 1
1.0
0.8
A u to c o rre la tio n
0.6
0.4
0.2
0.0
0 5 10 15 20
Lag
Intro
• However, the autocorrelations of an AR(p) model
do not become zero after a certain number of lags
—they die off rather than cut off.
Yt c Yt 1 et
• Stationarity: We will assume 1
• Can represent as an MA () :
Yt c et c et 1 c et 2
2
c
et et 1 et 2
2
1
Properties of AR(1)
c
0 ???????
1
0 E Yt
2
E t t 1 t 2
2 2
1 2 4 2
2
1
2
Properties of AR(1), cont.
k E Yt Yt k
E t t 1 2 t 2 k t k t k t k 1 2 t k 2
k k 2 k 4 2
k 1 2 4 2
k 2
1
2
k k k
0
Autocorrelation Function for AR(1):
Yt 0.8Yt 1 t
1.0
0.8
A u to c o rre la tio n
0.6
0.4
0.2
0.0
0 5 10 15 20
Lag
Autocorrelation Function for AR(1):
Yt 0.8Yt 1 t
1.0
0.5
A u to c o rre la tio n
0.0
-0.5
0 5 10 15 20
Lag
Intro
k k1 k 1 k 2 k 2 k 3 k 3 kk 0
• Here 1 , 2 , ...., k are assumed to be known
and we must solve this system of linear
equations for k 1 , k 2 , kk .
Solving System of Linear Equations:
Cramer’s Rule
.
.
.
Solving System of Linear Equations
.
.
.
Solving System of Linear Equations
• 2 by 2 Matrix
.
.
.
Solving System of Linear Equations
.
.
.
PACF
• We have k linear equations as shown below:
k1 k 2 1 k 3 2 kk k 1 1
k1 1 k 2 0 k 3 1 kk k 2 2
.
.
.
k1 k 1 k 2 k 2 k 3 k 3 kk k
• Here 1 , 2 , ...., k are assumed to be known
and we must solve this system of linear
equations for k 1 , k 2 , kk .
Use Cramer’s rule to solve system of linear equations.
The sample partial autocorrelation function is defined by:
0 1 1 k 2 1
1 1 k 3 2
ˆ k 1 k 2 1 k
kk
1 1 k 1
1 1 k 2
k 1 k 2 1
PACF: AR(1) Model
• For an AR(p) process we have k=p :
kk pp p
kk 0 for k p
j 1; 1 21 22 1
j 2; 2 21 1 22
PACF: MA(1) Model
j k1 j 1 k 2 j 2 k 3 j 3 kk j k