What does a sharp cutoff in the PACF after lag 'p' indicate in an AR(p) process? Question 8Answer a. The need for differencing. b. The presence of a moving average component. c. That the series is non-stationary. d. The order of the AR process.
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Step 1: Understand the PACF (Partial Autocorrelation Function) - The PACF measures the correlation between a time series and its lagged values, controlling for the values of the intervening lags. Show more…
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Below are the ACF and PACF of a non-stationary time series. Notice the slow linear decay and a partial autocorrelation lag 1 almost equal to one. These are indications of a non-stationary series where there is a unit root (i.e. the series can be made stationary by differencing). Below are the ACF and the PACF of the differenced data. What is the most likely model for the original data set? (Hint: don't forget to include the differencing). MA(1) AR(1) ARIMA(5,1,0) ARIMA(0,1,1)
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