A LINK TO ECONOMIC MODELS CHAPTER 5 UNDERSTANDING LINEAR DEPENDENCE: A LINK TO ECONOMIC MODELS 5.1 Price Dynamics: The Cob-Web Model Figure 5.1 The Cob-Web Model: Price Dynamics (One Supply Shock) Supply Demand González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

5.1.4 Simulation of the Model and Autocorrelation Function Figure 5.2 Time Series and Autocorrelation Functions of the AR Model González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

Figure 5.3 Time Series and Autocorrelation Functions of Producer Prices of Oranges in Florida González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

Figure 5.4 Alternative Price Dynamics (Smooth Adjustment to Equilibrium) Supply Demand González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

. 5.2 Portfolio Returns and Nonsynchronous Trading Figure 5.5 Two Assets Trading at Different Frequencies (Nonsynchronous Trading) day 1 day 2 day 3 day 4 . news González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

Table 5.1 Returns and their News Content González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

Figure 5.6 Autocorrelation Functions of Daily Portfolio Returns AMEX portfolio SP500 portfolio González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

5.3 Asset Prices and the Bid-Ask Bounce Figure 5.7 Time Series and Autocorrelation of Monthly Returns to BBVA González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.

Figure 5.8 Time Series and Autocorrelation Functions of the Simulated Series González-Rivera: Forecasting for Economics and Business, Copyright © 2013 Pearson Education, Inc.