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Basic Question 4 of 8
Assume a time series model has ARCH (1) errors. The variance of the errors in period t + 1 is modeled as σt+12 = 5.2 + 0.35 σt2. If the variance of the errors in one period is 2, the predicted variance of the error in the next period should be ______.
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Martin Rockenfeldt
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.