Suppose you observe the first T periods.
X1, X2, · · · , XT of an AR(1) process Xt = µ + φXt−1 + et.
Derive the Yule-Walker/Method of Moment estimate φˆMM for φ.
I thought YW was used to solve for ACF? Please advise.
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1 Answer
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Yule Walker equations uses autocorrelation function to estimate the parameters in the linear time series model. It's not used for solving ACF. But, you also need to calculate ACF values, in which you use method of moments method to estimate it from data you have.
