CFA Practice Question

There are 208 practice questions for this study session.

CFA Practice Question

Select the correct statement(s) regarding ARCH.

I. ARCH means the variance of the error term is not constant in all periods.
II. If a time series model contains ARCH (1) errors, then coefficients of the regression parameters are not correct.
A. I only
B. Both are correct
C. None of them
Explanation: I: It means the variance of the error term in one period depends on the variance of the error in previous periods.

II: The standard errors for the regression parameters are not correct in this case.

User Contributed Comments 1

User Comment
dblueroom so the coefficients of a model with ARCH errors are still valid? I knew that AR models with serial correlation, coefficients aren't valid.
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