### CFA Practice Question

There are 208 practice questions for this study session.

### CFA Practice Question

Which equation(s) represent(s) an AR time-series model?

I. xt = b0 + b1xt-1 + εt.
II. yt = b0 + b1t + εt.
III. lnyt = b0 + b1t + εt.
IV. xt = b0 + b1xt-1 + b2xt-2 + ... + bpxt-pt.
Correct Answer: I, II, III and IV

A key feature of an autoregressive model is that the current period values are related to previous period values. The 4 equations all presents the relationship.

I is called AR(1) model and IV is called AR(p) model. Notice that II, a linear trend model, and III, a log-linear trend model, are special cases of AR models.

### User Contributed Comments5

User Comment
MasterD Am I mistaken or does II and III not have any t-1 values, only t. If so, then what's all this about all options relating to PREVIOUS period values?
ucsbdan II and III are special cases: check the text book.
ericczhang I got it wrong too, but I'm guessing since t = (t-1)+1 you can rewrite the regression equation in terms of t-1 and thus it's an AR model since then you can rewrite the regression equation in terms of y-1.
sahilb7 In II and III, y is dependent upon b1t which is also related to (t-1)...
i.e. b1[(t-1)+1]
sahilb7 II is a Linear trend model
III is a Log-Linear trend model
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