Explanation:
Statement I is incorrect. The ARMA process forms an important part of time series analysis since it captures a very robust picture of the variable being estimated thanks to the inclusion of lagged random shocks and lagged observations.
Statement II is accurate. The ARMA process combines the lagged unobservable random shock characteristic of the MA process with the observed lagged time series characteristic of the AR process.
Statement III is accurate. The ARMA process involves gradually-decaying autocorrelations.
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Q.22 Which of the following statements is/are accurate? The autoregressive moving average (ARMA) process forms an important part of time series analysis since it:
I. Captures a very robust picture of the variable being estimated thanks to the exclusion of lagged random shocks and lagged observations
II. Combines the lagged unobservable random shock characteristic of the MA process with the observed lagged time series characteristic of the AR process
III. Involves gradually-decaying autocorrelations
A
I & II only
B
II & III only
C
I & III only
D
All of the above
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