If ε_t is the error in time t,ε_t_-1is the error in the previous time period,ρ is the correlation coefficient,and μ_t a random variable with autocorrelation,which of the following is the first-order autoregressive model of autocorrelated behavior? A)ε_t = ρε_t_-1μ_t B)ε_t = C)ε_t = ρε_t_-1 + μ_t D)ε_t = ρε_t_-1 - μ_t

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Quizplus · Accepted Answer

The first-order autoregressive model of autocorrelated behavior is given by εt = ρεt-1 + μt. This matches choice C, where the error term for time t is equal to the correlation coefficient times the error term for the previous time period plus a random variable with autocorrelation.

If εt Is the Error in Time T,εt-1 is the Error

If ε_t Is the Error in Time T,ε_t_-1is the Error