CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

If linear regression is used to model the relationship between two time series, and a test shows that neither of the two time series has a unit root, we should:
A. safely use liner regression.
B. safely use linear regression only if the time-series are co-integrated.
C. not use linear regression only if the time-series are not co-integrated.
Explanation: In this case, both time series are covariance stationary.

User Contributed Comments 2

User Comment
shiva5555 What do they mean by unit root?
jonan616 unit root exists if b1 - 1 = 0

it means it is non-stationary and can be tested with dickey fuller.
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