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.© BrainMass Inc. brainmass.com March 21, 2019, 6:02 pm ad1c9bdddf
Checking for Stationarity of an AR(2) model by examining the characteristic equation is discussed in the solution.