- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. Time-Series Analysis
- Subject 2. Autoregressive (AR) Time-Series Models
CFA Practice Question
The AR(1) model predicts that
II. If its current value is below b1/(1 - b0), the time series will increase.
III. If its current value is above b1/(1 - b0), the time series will decrease.
IV. If a time series is covariance-stationary then it has a finite mean-reverting level.
I. If its current value is b0/(1 - b1), the time series will stay the same.
II. If its current value is below b1/(1 - b0), the time series will increase.
III. If its current value is above b1/(1 - b0), the time series will decrease.
IV. If a time series is covariance-stationary then it has a finite mean-reverting level.
A. All of them
B. I and IV
C. I, II and III
Explanation: II and III: the level should be b0/(1 - b1).
IV: All covariance-stationary time series have a finite mean-reverting level.
User Contributed Comments 7
| User | Comment |
|---|---|
| tim2 | ohh tricky! |
| Yurik74 | just need to be attentive : ( |
| sg2006 | why isn't ii ans iii correct? If below the level the next value will go up and vice versa |
| ericczhang | ...that's just being cheeky. |
| dalue | I have the same question as sg2006. Why not II and III? |
| pmdallman | Very cheeky indeed |
| pmdallman | Dalue and sg2006 - look at the order of b1 and b0 in II and III - they've been inverted and are no longer in the right sequence |