20.24.3. Eric is a commodity analyst who fit four different candidate AR(p) models to a series of oil prices. For each of the candidate models, he then retrieved the Akaike information criterion (AIC) and the Bayesian information criterion (BIC).
20.24.2. Elizabeth is an economist tasked with modeling quarterly gross domestic product (GDP) in the United States. She starts with the plots displayed below. The raw data is displayed in the upper; she observes this GDP trend is obviously not stationary (why?
Explain mean reversion and calculate a mean-reverting level. Define and describe the properties of autoregressive moving average (ARMA) processes. Describe the application of AR, MA and ARMA processes.