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Basic Question 1 of 6
If we use an AR (1) model to specify a time series (quarterly data), the correct equation that includes a seasonal lag is:
B. xt = b0 + b1 xt-1 + b2 xt-4 + εt.
C. xt = b0 + b1 xt-1 + b2 xt-4.
A. xt = b0 + b1 xt-1 + εt.
B. xt = b0 + b1 xt-1 + b2 xt-4 + εt.
C. xt = b0 + b1 xt-1 + b2 xt-4.
User Contributed Comments 1
| User | Comment |
|---|---|
| akirchner1 | 'Quarterly' is key here which is why t-4 is used. Can't forget the error term though. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
explain autoregressive conditional heteroskedasticity (ARCH) and describe how ARCH models can be applied to predict the variance of a time series;
CFA® 2026 Level II Curriculum, Volume 1, Module 5.