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The Heteroskedastic Consequences of an Arbitrary Variance for Initial Disturbance of an AR(1) Model

Published online by Cambridge University Press:  11 February 2009

Jae Hoon Kim
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Abstract

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Information
Econometric Theory , Volume 7 , Issue 4 , December 1991 , pp. 544 - 545
Copyright
Copyright © Cambridge University Press 1991

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References

NOTE

Excellent solutions have been proposed independently by Badi H. Baltagi and Qi Li (the posers of the problem), Juan J. Dolado, Ruud H. Koning, Essie Maasoumi, and Klaus Pötzelberger.

In the solution proposed by Essie Maasoumi, which is almost identical to the one proposed by Badi H. Baltagi and Qi Li, he provides an alternative solution to the second question by noting that

where ∂α/∂x = bαbx log α, has been used. Since log ρ < 0, the right-hand side of the above equation is positive if τ > 1 – ρ2, and is negative otherwise.

In his solution, Klaus Pötzelberger notes that the results do not depend on the assumption that u 0 is normally distributed. The problem could be solved for any distribution for u 0 with finite second moment.