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    Fundamental Concepts: Enisumarminingsih, Ssi, MM

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    Barep Adji Widhi
    This document defines key concepts related to time series and stochastic processes. It discusses the mean and autocovariance functions used to characterize stochastic processes, and how these can be used to investigate covariance properties of different time series models. As an example, it also describes the random walk process and shows that it has a mean of 0 and autocovariance that depends only on the time difference.

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    Fundamental Concepts: Enisumarminingsih, Ssi, MM

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    Barep Adji Widhi
    9 views27 pages
    This document defines key concepts related to time series and stochastic processes. It discusses the mean and autocovariance functions used to characterize stochastic processes, and how these can be used to investigate covariance properties of different time series models. As an example, it also describes the random walk process and shows that it has a mean of 0 and autocovariance that depends only on the time difference.

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    This document defines key concepts related to time series and stochastic processes. It discusses the mean and autocovariance functions used to characterize stochastic processes, and how these can be used to investigate covariance properties of different time series models. As an example, it also describes the random walk process and shows that it has a mean of 0 and autocovariance that depends only on the time difference.

    Copyright:

    © All Rights Reserved
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    Download as pptx, pdf, or txt
    9 views27 pages

    Fundamental Concepts: Enisumarminingsih, Ssi, MM

    Uploaded by

    Barep Adji Widhi
    This document defines key concepts related to time series and stochastic processes. It discusses the mean and autocovariance functions used to characterize stochastic processes, and how these can be used to investigate covariance properties of different time series models. As an example, it also describes the random walk process and shows that it has a mean of 0 and autocovariance that depends only on the time difference.

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    FUNDAMENTAL CONCEPTS

    ENI SUMARMININGSIH, SSI, MM


    Time Series and Stochastic Processes

     The sequence of random variables {Yt : t = 0, ±1, ±2,


    ±3,…} is called a stochastic process
    Means, Variances, and Covariances

     For a stochastic process {Yt : t = 0, ±1, ±2, ±3,…}, the


    mean function is defined by
    μt = E(Yt) for t = 0, ±1, ±2, ... (2.2.1)
    μt is just the expected value of the process at time t.
    In general, μt can be different at each time point t
     The autocovariance function, γt,s, is defined as
    γt, s = Cov (Yt ,Ys) for t, s = 0, ±1, ±2, ... (2.2.2)
    where Cov(Yt, Ys) = E[(Yt − μt)(Ys − μs)]
    = E(YtYs) − μt μs
     The autocorrelation function, ρt,s, is given by
    ρt, s =Corr (Yt ,Ys) for t, s = 0, ±1, ±2, ...
    Where
     The following important properties follow from
    known results and our definitions
     To investigate the covariance properties of various
    time series models, the following result will be used
    repeatedly : If c1, c2,…, cm and d1, d2,…, dn are
    constants and t1, t2,…, tm and s1, s2,…, sn are time
    points, then
    EXAMPLES

    The Random Walk


     Let e1, e2,… be a sequence of independent, identically
    distributed random variables each with zero mean
    and variance . . The observed time series, {Yt : t = 1,
    2,…}, is constructed as follows:
    Alternatively, we can write

    with “initial condition” Y1 = e1.


    From Equation (2.2.8), we obtain the mean function
    so that
    Stationarity
    A stochastic process {Yt} is said to be weakly (or
    second-order) stationary if

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