Here are the correct steps for generating a random walk using the R language:

  • Use the arima.sim() to generate a Randomwalk model.
  • Now, go to the model argument and set it equal to a list(order = c(0, 1, 0)) for generating a RW-type model.
  • After that, set “n” equals 10 sp as to produce 10 different observations and then save this to the random_walk.
  • Now, use the ts.plot()function for plotting your random_walk data.
  • Next, use the diff() function for calculating the first difference between sets of your random_walk data.
  • Now, you can save this as random_walk_diff.
  • Finally, you should use another call to ts.plot() to be used for plotting random_walk_diff
BY Best Interview Question ON 18 Jul 2020