How can I demonstrate that a MA(2) process is invertible?
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Filippo Patrignani on 14 May 2021
I have to solve this exercise: Consider the following MA(2) process yt = 1 − 0.5εt−1 + 0.3εt−2 + εt . Is the moving average process invertible? Explain. Hint: Use Matlab to compute the roots of the relevant polynomial. Can anyone help me?.
Pratyush Roy on 17 May 2021
Since the constant term does not matter in terms of whether the series converges or diverges, we can ignore it and hence the equation can be written as:
Here z(t) = y(t)-1
Now, the relevant polynomial becomes p(x) = 1-0.5x+0.3x^2;
To check whether the model is invertible or not, we compute the roots of p(x) = 0 using the roots method.
Hope this helps!