You signed in with another tab or window. Reload to refresh your session.You signed out in another tab or window. Reload to refresh your session.You switched accounts on another tab or window. Reload to refresh your session.Dismiss alert
Copy file name to clipboardExpand all lines: lectures/ar1_processes.md
+8-10Lines changed: 8 additions & 10 deletions
Display the source diff
Display the rich diff
Original file line number
Diff line number
Diff line change
@@ -36,7 +36,7 @@ These simple models are used again and again in economic research to represent t
36
36
* productivity, etc.
37
37
38
38
We are going to study AR(1) processes partly because they are useful and
39
-
partly because they help us understand important concepts.
39
+
partly because they help us understand important concepts.
40
40
41
41
Let's start with some imports:
42
42
@@ -56,14 +56,14 @@ The **AR(1) model** (autoregressive model of order 1) takes the form
56
56
X_{t+1} = a X_t + b + c W_{t+1}
57
57
```
58
58
59
-
where $a, b, c$ are scalar-valued parameters
59
+
where $a, b, c$ are scalar-valued parameters
60
60
61
61
(Equation {eq}`can_ar1` is sometimes called a **stochastic difference equation**.)
62
62
63
63
```{prf:example}
64
64
:label: ar1_ex_ar
65
65
66
-
For example, $X_t$ might be
66
+
For example, $X_t$ might be
67
67
68
68
* the log of labor income for a given household, or
69
69
* the log of money demand in a given economy.
@@ -356,9 +356,7 @@ In this equation, we can use observed data to evaluate the left hand side of {eq
356
356
357
357
And we can use a theoretical AR(1) model to calculate the right hand side.
358
358
359
-
If $\frac{1}{m} \sum_{t = 1}^m X_t$ is not close to $\psi^(x)$, even for many
360
-
observations, then our theory seems to be incorrect and we will need to revise
361
-
it.
359
+
If $\frac{1}{m} \sum_{t = 1}^m h(X_t)$ is not close to $\int h(x)\psi^*(x) dx$, even for many observations, then our theory seems to be incorrect and we will need to revise it.
0 commit comments