Exam MAS-II Practice Question 22
Study guide: Exam MAS-II
A stationary series of 200 quarterly loss ratios has the following sample autocorrelations (ACF) and partial autocorrelations (PACF):
| Lag | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| ACF | 0.80 | 0.52 | 0.30 | 0.15 | 0.06 | 0.02 |
| PACF | 0.80 | -0.32 | 0.05 | -0.04 | 0.06 | 0.03 |
The approximate 95% significance bounds are \pm 2/\sqrt{200} = \pm 0.14.
Which model is best supported by these plots?
- A) A random walk
- B) MA(1)
- C) MA(2)
- D) AR(1)
- E) AR(2)
Answer this question and see the worked solution