- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. Time-Series Analysis
- Subject 4. Seasonality in Time-Series Models

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**CFA Practice Question**

The following table gives the regression output of an AR(1) model.

II. The quarterly sales amount looks like a random walk.

III. We cannot reject the null hypothesis that the fourth autocorrelation is equal to 0.

IV. The intercept differs significantly from 0.

Which statement is true about the time series?

I. There is a strong seasonal autocorrelation of the residuals.

II. The quarterly sales amount looks like a random walk.

III. We cannot reject the null hypothesis that the fourth autocorrelation is equal to 0.

IV. The intercept differs significantly from 0.

A. I and III

B. II and IV

C. I and IV

**Explanation:**The critical value for a t-statistic is about 2.0 at the 0.05 significance level and 66 degrees of freedom. The lag 1, intercept and fourth autocorrelation all have a t-statistics that are larger than 2.0 so we can reject the null hypothesis that they are 0.

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