Question

Suppose that we believe a weakly stationary return sequence r following the model, where at ls the 1.1.d. noise sequence with mean 0 and variance σ. and at s independent of rt-1,Tt-2. (a) Express the mean μ of the return sequence rt using φο, φι, φ2 and σ (lag-0 autocovariance) of r)

Answer 1