Why should I choose AnalystNotes?
AnalystNotes specializes in helping candidates pass. Period.
Basic Question 2 of 7
The Dickey-Fuller test shows that in order to test if a time series xt is a random walk with drift, we should conduct
A. a t-test of null hypothesis that b1 - 1 = 0, using conventional critical values for a t-test.
B. a t-test of null hypothesis that b1 - 1 = 0, using a revised set of critical values for a t-test. These revised values are larger than the conventional critical values.
C. a t-test of null hypothesis that b1 - 1 = 0, using a revised set of critical values for a t-test. These revised values are smaller than the conventional critical values.
User Contributed Comments 0
You need to log in first to add your comment.
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
describe implications of unit roots for time-series analysis, explain when unit roots are likely to occur and how to test for them, and demonstrate how a time series with a unit root can be transformed so it can be analyzed with an AR model;
describe the steps of the unit root test for nonstationarity and explain the relation of the test to autoregressive time-series models;
CFA® 2025 Level II Curriculum, Volume 1, Module 5.