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Basic Question 5 of 5
An analyst tests the two time series errors for a unit root using the Dickey-Fuller test and determines the critical values using the Engle and Granger test. The test fails to reject the null hypothesis. The most accurate conclusion is that:
A. The two series are cointegrated.
B. The two series are not cointegrated.
C. The error terms are covariance stationary.
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Learning Outcome Statements
explain how time-series variables should be analyzed for nonstationarity and/or cointegration before use in a linear regression;
determine an appropriate time-series model to analyze a given investment problem and justify that choice.
CFA® 2025 Level II Curriculum, Volume 1, Module 5.