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Stationarity of Time Series

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Given the following AR(2) model for some returns
y(t) = 0.803*y(t-1) + 0.682*y(t-2) + u(t)
where u(t) is a white noise error process.

By examining the characteristic equation, check the estimated model for stationarity.

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Solution Summary

Checking for Stationarity of an AR(2) model by examining the characteristic equation is discussed in the solution.