CFA Practice Question

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CFA Practice Question

If a time series model contains ARCH (1) errors,

I. The standard errors for the regression parameters are not correct.
II. The variance of the error terms is not reliable.
III. The coefficients of the regression parameters are not correct.
Correct Answer: I only

User Contributed Comments 3

User Comment
quanttrader fix with robust standard errors or White-corrected standard errors
sahilb7 Why not II?
b25331 Not II, because if a time series contains ARCH(1) errors, the variance of these errors in period t+1 can be predicted in period t
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