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3. Two researchers are asked to estimate an ARMA model for a daily USD/GBP exchange rate return series, denoted xt. Researcher A uses Schwarz's information criterion (SBC) for determining the appropriate model order and arrives at an ARMA(0,1). Researcher B uses Akaike's information criterion (AIC) which deems an ARMA(2,0) to be optimal. The estimated models are: Model by A: Model by B: x = 0.38+0.10u-1 0.63+0.17x-1-0.09x1-2 where it is an error term. You are given the following data for time until day z (i.e. t = z) x:= 0.31, x2-1=0.02, x-2=-0.16 u:= -0.02, u:-1=0.13, u=-2 = 0.19. a) Produce forecasts for the next 4 days for x (i.e. for times z + 1, z+2, z + 3, z + 4) from both models. b) Suppose that the actual values of the series x on days z +1, z +2, z + 3, z + 4 turned out to be 0.62, 0.19, -0.32, 0.72, respectively. Determine which researcher's model produced the most accurate forecasts using Mean-Square Error (MSE) criterion.

3. Two researchers are asked to estimate an ARMA model for a daily USD/GBP exchange rate return series, denoted xt. Researcher A uses Schwarz's information criterion (SBC) for determining the appropriate model order and arrives at an ARMA(0,1). Researcher B uses Akaike's information criterion (AIC) which deems an ARMA(2,0) to be optimal. The estimated models are: Model by A: Model by B: x = 0.38+0.10u-1 0.63+0.17x-1-0.09x1-2 where it is an error term. You are given the following data for time until day z (i.e. t = z) x:= 0.31, x2-1=0.02, x-2=-0.16 u:= -0.02, u:-1=0.13, u=-2 = 0.19. a) Produce forecasts for the next 4 days for x (i.e. for times z + 1, z+2, z + 3, z + 4) from both models. b) Suppose that the actual values of the series x on days z +1, z +2, z + 3, z + 4 turned out to be 0.62, 0.19, -0.32, 0.72, respectively. Determine which researcher's model produced the most accurate forecasts using Mean-Square Error (MSE) criterion.

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
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3. Two researchers are asked to estimate an ARMA model for a daily USD/GBP exchange rate return series, denoted xt. Researcher A uses Schwarz's information criterion (SBC) for determining the appropriate model order and arrives at an ARMA(0,1). Researcher B uses Akaike's information criterion (AIC) which deems an ARMA(2,0) to be optimal. The estimated models are: Model by A: Model by B: = 0.38+0.10u-1 = 0.63+0.17x₁-1-0.09xt-2 where ut is an error term. You are given the following data for time until day z (i.e. t = z) x² = 0.31, x=-1=0.02, x-2=-0.16 uz = -0.02, uz-1-0.13, uz-2=0.19. a) Produce forecasts for the next 4 days for x (i.e. for times z + 1, z + 2, z + 3, z + 4) from both models. b) Suppose that the actual values of the series x on days z +1, z +2, z + 3, z + 4 turned out to be 0.62, 0.19, -0.32, 0.72, respectively. Determine which researcher's model produced the most accurate forecasts using Mean-Square Error (MSE) criterion.
Transcribed Image Text:3. Two researchers are asked to estimate an ARMA model for a daily USD/GBP exchange rate return series, denoted xt. Researcher A uses Schwarz's information criterion (SBC) for determining the appropriate model order and arrives at an ARMA(0,1). Researcher B uses Akaike's information criterion (AIC) which deems an ARMA(2,0) to be optimal. The estimated models are: Model by A: Model by B: = 0.38+0.10u-1 = 0.63+0.17x₁-1-0.09xt-2 where ut is an error term. You are given the following data for time until day z (i.e. t = z) x² = 0.31, x=-1=0.02, x-2=-0.16 uz = -0.02, uz-1-0.13, uz-2=0.19. a) Produce forecasts for the next 4 days for x (i.e. for times z + 1, z + 2, z + 3, z + 4) from both models. b) Suppose that the actual values of the series x on days z +1, z +2, z + 3, z + 4 turned out to be 0.62, 0.19, -0.32, 0.72, respectively. Determine which researcher's model produced the most accurate forecasts using Mean-Square Error (MSE) criterion.
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