The random walk model is written as: $Y _ { t } = Y _ { t - 1 } + m + e _ { t }$
)In this model, $e _ { t }$
Represents the:
A) average of the Y's
B) average of the X's
C) forecasted value
D) random series with mean 0 and some constant standard deviation

Question

Quizplus · Accepted Answer

In the random walk model, $e_t$ represents the error term or shock at time t, which is a random series with a mean of 0 and some constant standard deviation, reflecting the unpredictable changes in the series.

The Random Walk Model Is Written As Yt=Yt−1+m+etY _ { t } = Y _ { t - 1 } + m + e _ { t }Yt​=Yt−1​+m+et​

The Random Walk Model Is Written As $Y _ { t } = Y _ { t - 1 } + m + e _ { t }$