Which of the following conditions must hold for the autoregressive part of an ARMA model to be stationary?
A) All roots of the characteristic equation must lie outside the unit circle
B) All roots of the characteristic equation must lie inside the unit circle
C) All roots must be smaller than unity
D) At least one of the roots must be bigger than one in absolute value.

Question

Quizplus · Accepted Answer

For an ARMA model to be stationary, the roots of the characteristic equation associated with the autoregressive (AR) part must lie outside the unit circle in the complex plane. This ensures that the impact of shocks to the system diminishes over time, a key property of stationary processes.

Which of the Following Conditions Must Hold for the Autoregressive