The exact finite sample behavior is investigated on the
bias of multiperiod leastsquares forecasts in the
normal autoregressive model
yt =
α +
βyt–1
+ ut.
Necessary and sufficient conditions are given for
the existence of the bias and an expression is
presented which we use to obtain exact numerical
results for finite samples. The unit root and near
unit root behavior is studied in detail and some
popular preconceptions about the behavior of the
bias are shown to be false.