TIME SERIES Solutions to Exercise Sheet 2 1.

(a) First note that, since

d k=1

sk = 0, the period average may be written as 1 d 1 d Xjk = (mj + Yjk ). d k=1 d k=1 1 d mj = mj , d k=1

m j = Thus, we have

E (m j) =

which shows that mj is an unbiased estimator of mj . (b) To show that the seasonal component estimator satises the model assumptions, we need to show that d k = 0. Now, we may write k=1 s 1 d b 1 b s k = (Xjk m j) = (dm j dm j ) = 0, b k=1 j =1 b j =1 k=1 as required. Further, we have E ( sk ) = 1 b 1 b E (Xjk m j) = sk = sk , b j =1 b j =1
d

which shows that s k is also an unbiased estimator of sk . 2. (a) For the additive model Xt = mt + st + Yt , we assume that st = st12 and that mt = 0 + 1 t. So the dierenced series is 12 Xt = = = = = Xt Xt12 mt + st + Yt (mt12 + st12 + Yt12 ) mt mt12 + 12 Yt 0 + 1 t {0 + 1 (t 12)} + 12 Yt 121 + 12 Yt .

For stationarity, we check that the expectation and variance are constant, and that the covariances do not depend on t. Clearly, E (12 Xt ) = 121 , which is a constant. We also have cov(12 Xt , 12 Xt+ ) = cov(12 Yt , 12 Yt+ ) = cov(Yt Yt12 , Yt+ Yt+ 12 ) = cov(Yt , Yt+ ) cov(Yt12 , Yt+ ) cov(Yt , Yt+ 12 ) +cov(Yt12 , Yt+ 12 ) = 2Y ( ) Y ( 12) Y ( + 12).

Since this does not depend on t, the dierenced series is stationary. (b) For the mixed model Xt = mt st + Yt , we have 12 Xt = mt st + Yt (mt12 st12 + Yt12 ) = (0 + 1 t)st {0 + 1 (t 12)}st12 + 12 Yt = 121 st12 + 12 Yt , which gives E (12 Xt ) = 121 st12 . Since this still depends on t, it is not a constant. However, as st = st12 = st24 , we can eliminate the seasonal eect from 12 Xt by applying the same operator again: 2 12 Xt = 12 (12 Xt ) = 121 st12 + 12 Yt (121 st24 + 12 Yt12 ) = Yt 2Yt12 + Yt24 = 2 12 Yt .
2 2 We then have E (2 12 Xt ) = 0. It can also easily be shown that cov(12 Xt , 12 Xt+ ) is 2 a constant. Hence, 12 Xt is a stationary process.

3. Since {Xt } W N (0, 2 ), we know that E (Xt ) = 0, cov(Xt , Xt+ ) = 0 for = 0 and var(Xt ) = 2 . This means that both the expectation of Xt and the covariance of Xt and Xt+ do not depend on t, and so white noise is a weakly stationary process. Thus, the autocovariance function is given by ( ) = 2 0 if = 0, if = 0.

It follows that the autocorrelation function is ( ) = 1 0 if if = 0, = 0.