Problem
Walmart Stock. Figure 17.14 shows the series of Walmart daily closing prices between February 2001 and February 2002.
a. Fit an AR(1) model to the close price series. Report the coefficient table.
b. Which of the following is/are relevant for testing whether this stock is a random walk?
• The autocorrelations of the close prices series
• The AR(1) slope coefficient
• The AR(1) constant coefficient
c. Does the AR model indicate that this is a random walk? Explain how you reached your conclusion.
d. What are the implications of finding that a time-series is a random walk? Choose the correct statement(s) below.
• It is impossible to obtain forecasts that are more accurate than naive forecasts for the series
• The series is random
• The changes in the series from one period to the next are random.