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Consider the Following MA(3) Process

Question 26

Multiple Choice

Consider the following MA(3) process., yt = 0.1 + 0.4ut-1 + 0.2ut-2 - 0.1ut-3 + ut
What is the optimal forecast for yt, 3 steps into the future (i.e. for time t+2 if all information until time t-1 is available) , if you have the following data?
Ut-1 = 0.3; ut-2 = -0.6; ut-3 = -0.3


A) 0.4
B) 0.0
C) 0.07
D) -0.1

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