- CFA Exams
- CFA Exam: Level II 2021
- Study Session 2. Quantitative Methods (1)
- Reading 6. Time-Series Analysis
- Subject 6. Regressions with more than one time series

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**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:

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.

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.

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**User Contributed Comments**
1

User |
Comment |
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wtwaf |
key words: one of the two good question! |