LO 3.3.2.F

Learning Objective: List the properties of an autocorrelation function for an AR(1) process.

Review:

Considering the AR(1) process

• Properties

• The autocorrelation function for {Yt} is equal to 𝛼k for any lag k (a geometric decline). For instance:

Autocorrelation for lag k = 1  is equal to  “𝛼”

Autocorrelation for lag k = 2 is equal to  “𝛼2 ”

Autocorrelation for lag k = 3 is equal to  “ 𝛼3 ”

• The autocorrelation function for the increments{𝜀t} is “0” for any

lag k > 0.