Consider a Random Walk Model with the Following Equation

question 77

Essay

Consider a random walk model with the following equation: , where is a normally distributed random series with mean of 0 and standard deviation of 12.
-(A) Use Excel to generate a time series of 25 values using this random walk model with a starting value of 200.
(B) Conduct a runs test on the series you generated for (A). Is it random? Explain.
(C) Conduct a runs test on the differences between successive values for the series you generated for (A). Is it random? Explain.
(D) Use the time series you constructed in (A) to forecast the next observation.

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Definitions:

Addresses

References or locations in computer memory that allow data to be uniquely identified and accessed.

Increment

Increment is an operation that increases the value of a variable by a fixed amount, usually by 1.

Decrement

An operation that decreases the value of a variable by a specific amount, commonly by one.

Initializing Pointers

The act of assigning a starting address to pointer variables so they point to the correct memory locations.