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If ut is the error in time t, ut-1 is the error in the previous time...

If ut is the error in time t, ut-1 is the error in the previous time period, ρ is the correlation coefficient, and vt a independent and identically distributed (iid) random variable, which of the following is the first-order autoregressive model of autocorrelated behavior?

  • A. ut = ρut-1 + vt

  • B. ut = ρut-1 - vt

  • C. ut =

  • D. ut = ρut-1vt

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Answer #1

The first order auto regressive model is given by:

A. ut = ρut-1 + vt

Since observation depends upon and random error

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