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Basic Question 1 of 3

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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I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt

Martin Rockenfeldt

Learning Outcome Statements

describe the steps of the unit root test for nonstationarity and explain the relation of the test to autoregressive time-series models;

explain how to test and correct for seasonality in a time-series model and calculate and interpret a forecasted value using an AR model with a seasonal lag;

CFA® 2024 Level II Curriculum, Volume 1, Module 5.