- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 5. Time-Series Analysis
- Subject 4. Unit Roots for Time-Series Analysis
CFA Practice Question
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.
Correct Answer: B
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