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ba736

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tT
发表于 2011-7-13 16:41 | 只看该作者

mean reversion refresher

next, something, current, expect, should
just a refresher on something i had way wrong.

Quant. AR models

intercept/(1-slope) = mean reverting level.

Anytime the current level is ABOVE the mean reverting level, you should expect the next value to be below the last value.
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llxx

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2#
发表于 2011-7-13 16:41 | 只看该作者
june2009 Wrote:
-------------------------------------------------------
> just a refresher on something i had way wrong.
>
> Quant. AR models
>
> intercept/(1-slope) = mean reverting level.
>
> Anytime the current level is ABOVE the mean
> reverting level, you should expect the next value
> to be below the last value.

If you are asking for confirmation, then that is correct.

NO EXCUSES

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kingstongal

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3#
发表于 2011-7-13 16:41 | 只看该作者
a random walk has a slope equal to 1 (bi)
so random walks have no mean eversting level bo/1-1
therefore non convarience stationary
AR model can not be used
need to first difference

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MiniMe7

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4#
发表于 2011-7-13 16:41 | 只看该作者
It should be noted that if b1 is APPROXIMATELY 1, a unit root exists. I've been burned on practice questions where b1 was 0.99.

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