- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 5. Time-Series Analysis
- Subject 6. Autoregressive Conditional Heteroskedasticity Models
CFA Practice Question
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 ______.
Correct Answer: 5.9
5.2 + 0.35 x 2 = 5.9.
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