An AR(1)process is written as
A) $\varepsilon _ { t } = \rho \varepsilon _ { t - 1 } + u _ { t }$
B) $\varepsilon _ { i } = \rho \varepsilon _ { i - 1 } + u _ { i }$
C) $\varepsilon _ { t } = \rho _ { 1 } \varepsilon _ { t - 1 } + \rho _ { 2 } \varepsilon _ { t - 2 } + u _ { t }$
D) $\varepsilon _ { i } = \rho _ { 1 } \varepsilon _ { i - 1 } + \rho _ { 2 } \varepsilon _ { i - 2 } + u _ { i } .$

Question

Quizplus · Accepted Answer

An AR(1) process only includes the lagged value of the error term, which is denoted by $\varepsilon_{t-1}$. Therefore, the correct specification is shown in option A. Option B includes an index instead of time, which is inconsistent with the time series notation. Option C includes two lagged error terms, which is not an AR(1) process. Option D includes two lagged error terms, which is not an AR(1) process.

An AR(1)process Is Written as A) εt=ρεt−1+ut\varepsilon _ { t } = \rho \varepsilon _ { t - 1 } + u _ { t }εt​=ρεt−1​+ut​

An AR(1)process Is Written as
A) $\varepsilon _ { t } = \rho \varepsilon _ { t - 1 } + u _ { t }$