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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:

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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Craig Baugh

Craig Baugh

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.