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Basic Question 3 of 8
If a time series model contains ARCH (1) errors,
II. The variance of the error terms is not reliable.
III. The coefficients of the regression parameters are not correct.
I. The standard errors for the regression parameters are not correct.
II. The variance of the error terms is not reliable.
III. The coefficients of the regression parameters are not correct.
User Contributed Comments 3
| User | Comment |
|---|---|
| quanttrader | fix with robust standard errors or White-corrected standard errors |
| sahilb7 | Why not II? |
| b25331 | Not II, because if a time series contains ARCH(1) errors, the variance of these errors in period t+1 can be predicted in period t |
Your review questions and global ranking system were so helpful.
Lina
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® 2025 Level II Curriculum, Volume 1, Module 5.