Dear fiends, in the video 1.2 there's a mention that stationary means "that std changes slower than a normal diffusion" – how do you represent that mathematically?
Also, why is the AUD/CAD pair stationary? Is this an empirical observation? Any resources to lookup?
Many thanks
Hello Alex,
"that std changes slower than a normal diffusion" – how do you represent that mathematically? - Mathematically, this can be represented using the diffusion process models like Brownian motion. If drift or infinitesimal change in the mean of the process is greater than the change in its standard deviation then the series is stationary.
"why is the AUD/CAD pair stationary?" - empirical observation verified by an ADF test. You can download the series and try running the ADF test on it.
Do get back if further clarification is needed.