- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. Time-Series Analysis
- Subject 6. Regressions with More Than One Time Series

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**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.

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**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. |