CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

Assume a time series model has ARCH (1) errors. The variance of the errors in period t + 1 is modeled as σt+12 = 5.2 + 0.35 σt2. If the variance of the errors in one period is 2, the predicted variance of the error in the next period should be ______.
Correct Answer: 5.9

5.2 + 0.35 x 2 = 5.9.

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