Consider the Following MA(3) Process

question 26

Multiple Choice

Consider the following MA(3) process., y_t = 0.1 + 0.4u_t-1 + 0.2u_t-2 - 0.1u_t-3 + u_t
What is the optimal forecast for y_t, 3 steps into the future (i.e. for time t+2 if all information until time t-1 is available) , if you have the following data?
U_t-1 = 0.3; u_t-2 = -0.6; u_t-3 = -0.3

• A) 0.4
• B) 0.0
• C) 0.07
• D) -0.1

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