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Basic Question 2 of 5
The first difference of a random walk time series has a mean-reverting level of:
B. -1.
C. 0/0, or an undefined one.
A. 0.
B. -1.
C. 0/0, or an undefined one.
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I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
explain the instability of coefficients of time-series models;
describe characteristics of random walk processes and contrast them to covariance stationary processes;
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;
CFA® 2024 Level II Curriculum, Volume 1, Module 5.