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Basic Question 0 of 7

If we use an AR (1) model to specify a time series (quarterly data), the correct equation that includes a seasonal lag is:

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.
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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.
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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

Barnes

Learning Outcome Statements

explain how to test and correct for seasonality in a time-series model and calculate and interpret a forecasted value using an AR model with a seasonal lag;

CFA® 2025 Level II Curriculum, Volume 1, Module 5.