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ETF3200 Econometrics

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Question 1  Consider a simple time series model of the form Xt = a + b t + cXt1 + et; t = 1; 2; : : : ; T; (1) where et  N(0; 1) is a sequence of independent and normally distributed (i.n.d.) random variables. Let X0 = 0, and a, b and c be known constants. Model (1) covers the following commonly used scenarios.  Linear trending model: Xt = a + b t + et; t = 1; 2;  T: (2) What is the probability distribution of Xt ? Provide the necessary detail Random walk model without intercept: Xt = Xt1 + et; t = 1; 2 T: (3) Do you know the probability distribution of Xt ? Provide the necessary detail

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Tellus molestie nunc non blandit massa enim nec dui. Tellus molestie nunc non blandit massa enim nec dui. Ac tortor vitae purus faucibus ornare suspendisse sed nisi. Pharetra et ultrices neque ornare aenean euismod. Pretium viverra suspendisse potenti nullam ac tortor vitae. Morbi quis commodo odio aenean sed. At consectetur lorem donec massa sapien faucibus et. Nisi quis eleifend quam adipiscing vitae proin sagittis nisl rhoncus. Duis at tellus at urna condimentum mattis pellentesque. Vivamus at augue eget arcu dictum varius duis at. Justo donec enim diam vulputate ut. Blandit libero volutpat sed cras ornare arcu. Ac felis donec et odio pellentesque diam volutpat commodo. Convallis a cras semper auctor neque. Tempus iaculis urna id volutpat lacus. Tortor consequat id porta nibh.

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