The third step of the Regression test for AR(1)is to estimate the model
A) $e _ { t } = \rho e _ { t - 1 } + u _ { t }$
B) $e _ { t - 1 } = \rho e _ { t } + u _ { t }$
C) $e _ { t } = \rho _ { 1 } e _ { t - 1 } + \rho _ { 2 } e _ { t - 2 } + u _ { t }$
D) $y _ { t } = \rho x _ { t } + u _ { t }$

Question

Quizplus · Accepted Answer

In an AR(1) model, the error at time t can only be related to the error at time t-1. Thus, the correct model specification for AR(1) is e_t = rho*e_{t-1} + u_t.

The Third Step of the Regression Test for AR(1)is to Estimate