- 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
In the context of ARCH, what does "heteroskedasticity" refer to?
A. Constant variance of residuals.
B. Time-varying volatility in the data.
C. Serial correlation in the time series.
D. Stationarity of the time series.
Correct Answer: B
Heteroskedasticity in the autoregressive model makes the standard errors of the regression coefficients of the model invalid, leading to misleading interpretations.
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