Glossary of economics research
Results of search for AR follow:
AR:
Stands for "autoregressive." Describes a stochastic process
(denote here, et) that can be described by a weighted sum of its
previous values and a white noise error. An AR(1) process is a
first-order one, meaning that only the immediately previous value has a direct
effect on the current value:
et = ret-1 +
ut
where r is a constant that has absolute value less
than one, and ut is drawn from a distribution with mean zero and
finite variance, often a normal distribution.
An AR(2) would have the form:
et = r1et-1 +
r2et-2 + ut
and so on. In theory a process might be represented by an
AR(infinity).
Contexts: time series; econometrics; statistics
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