Exercise

# Compare AR Model with Random Walk

Sometimes it is difficult to distinguish between a time series that is slightly mean reverting and a time series that does not mean revert at all, like a random walk. You will compare the ACF for the slightly mean-reverting interest rate series of the last exercise with a simulated random walk with the same number of observations.

You should notice when plotting the autocorrelation of these two series side-by-side that they look very similar.

Instructions

**100 XP**

- Import
`plot_acf`

function from the`statsmodels`

module - Create two axes for the two subplots
- Plot the autocorrelation function for 12 lags of the interest rate series
`interest_rate_data`

in the top plot - Plot the autocorrelation function for 12 lags of the interest rate series
`simulated_data`

in the bottom plot