### CFA Practice Question

There are 184 practice questions for this topic.

### CFA Practice Question

Which one is true about an autoregressive model?

I. It is a model in which you use the statistical properties of the past behavior of a variable (its derivatives with respect to time, in some sense) to predict its behavior in the future.
II. One benefit of using an autoregressive model for forecasting is that it is not necessary to predict the future values of the explanatory variables first.
III. A random walk is a special case of auto-regressive model.
A. I and II
B. II and III
C. I, II and III
Explanation: I. An autoregressive model is one in which the independent variable is a lagged value of the dependent variable.

II. If Yt is expressed as a function of an explanatory variable X, then it is necessary to know or forecast Xt+1 in order to forecast Yt+1,but if Yt is expressed as a function of Yt-1, we need only know or forecast Yt in order to forecast Yt+1.

III. The random walk equation is a special case of an AR(1) model with b0 = 0 and b1 = 1.