Reading 13: Time-Series Analysis - LOS n ~ Q1-3 white, black, monthly

mayanfang1

Q1. Alexis Popov, CFA, is analyzing monthly data. Popov has estimated the model x_t = b₀ + b₁ × x_t-1 + b₂ × x_t-2 + e_t. The researcher finds that the residuals have a significant ARCH process. The best solution to this is to:

A)   re-estimate the model with generalized least squares.

B)   re-estimate the model using only an AR(1) specification.

C)   re-estimate the model using a seasonal lag.

Q2. Alexis Popov, CFA, has estimated the following specification: x_t = b₀ + b₁ × x_t-1 + e_t. Which of the following would most likely lead Popov to want to change the model’s specification?

A)   Correlation(e_t, e_t-1) is not significantly different from zero.

B)   Correlation(e_t, e_t-2) is significantly different from zero.

C)   b₀ < 0.

Q3. Alexis Popov, CFA, wants to estimate how sales have grown from one quarter to the next on average. The most direct way for Popov to estimate this would be:

A)   an AR(1) model.

B)   a linear trend model.

C)   an AR(1) model with a seasonal lag.

 

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