Effect of Shock on the Stationary and Nonstationary Autoregressive (AR) Process

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Changing the stochastic shock occurring at time , one can see its effect on later values of the time series in the stationary (blue) and nonstationary (brown) autoregressive AR(1) process. In the case of a stationary process, the effect of the shock disappears and the time series reverts to its mean value. In the nonstationary case, stochastic shock has a permanent effect and the process does not revert to its mean value.

Contributed by: Ako Sauga (August 2018)
Open content licensed under CC BY-NC-SA


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