- CFA Exams
- 2025 Level II
- Topic 1. Quantitative Methods
- Learning Module 5. Time-Series Analysis
- Subject 7. Regressions with More Than One Time Series
Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Subject 7. Regressions with More Than One Time Series PDF Download
Occasionally an analyst will run a regression using two time series i.e. time series utilizing two different variables. For example, using the market model to estimate the equity beta for a stock, an analyst regresses a time series of the stock's returns (yt) on a time series of returns for the market (xt). Cointegration means that two time series are economically linked (related to the same macro variable) or follow the same trend and that relationship is not expected to change.
In this case, we have two different time series, yt and xt. Either one of the time series is subject to non-stationarity.
- If neither data series has a unit root : VALID
- If only one data series has a unit root: INVALID
- If both data series have unit root & they are cointegrated : VALID
- If both data series have unit root & they are not cointegrated : INVALID
User Contributed Comments 0
You need to log in first to add your comment.
I used your notes and passed ... highly recommended!
Lauren
My Own Flashcard
No flashcard found. Add a private flashcard for the subject.
Add