- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. Time-Series Analysis
- Subject 3. Random Walks and Unit Roots

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**CFA Practice Question**

The first difference of a random walk time series

II. has a mean-reverting level of 1.

III. is a special case of AR(1) model.

I. is covariance stationary.

II. has a mean-reverting level of 1.

III. is a special case of AR(1) model.

A. I and III

B. II and III

C. I, II, and III

**Explanation:**I: the variance is σ

^{2}. II: it has a mean-reverting level of 0. III: In this case, both b

_{0}and b

_{1}are 0, and y

_{t}= ε

_{t}.

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