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Basic Question 0 of 12

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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Martin Rockenfeldt

Martin Rockenfeldt

Learning Outcome Statements

explain how a bond's exposure to each of the factors driving the yield curve can be measured and how these exposures can be used to manage yield curve risks;

explain the maturity structure of yield volatilities and their effect on price volatility.

CFA® 2025 Level II Curriculum, Volume 4, Module 26.