Which of the following statements is true?
A)A random walk process is stationary.
B)The variance of a random walk process increases as a linear function of time.
C)Adding a drift term to a random walk process makes it stationary.
D)The variance of a random walk process with a drift decreases as an exponential function of time.

Question

Quizplus · Accepted Answer

A random walk process is not stationary because its mean and variance both increase with time. The variance of a random walk process increases as the square of time, not as a linear function of time. Adding a drift term to a random walk process does not make it stationary. The variance of a random walk process with a drift still increases with time, but at a slower rate than without a drift. Therefore, the correct statement is that the variance of a random walk process increases as a square function of time.

Which of the Following Statements Is True