CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

If linear regression is used to model the relationship between two time series, and a test shows that one of the two time series has a unit root, we should:

A. not use linear regression.
B. safely use linear regression if the time series are co-integrated.
C. not use linear regression if the time series are not co-integrated.
Correct Answer: A

In this case, the error term in the regression would not be covariance stationary. The linear regression should not be used.

User Contributed Comments 1

User Comment
wtwaf key words: one of the two

good question!
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