Finite Sample Analysis of the First Order Autoregressive Model

Abstract

In this paper we have derived the exact first and second moments of the OLS estimator of α in the model y t = α y t-1 + u t. Sawa (1978) has analyzed this model when u t is a white noise. We have extended his analysis to the case where u t follows MA(l) (first order moving average) proces with the coefficient different from α both with and without an intercept term in the model.