Question #11
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 5
Status: Unattempted
Part of Context Group: Q11-12
First in Group
Shared Context
Question
With respect to heteroskedasticity in the model, we can definitively say:
Answer Choices:
A. nothing
B. an ARCH process exists because the autocorrelation coefficients of the residuals have different signs
C. heteroskedasticity is not a problem because the DW statistic is not significant
Explanation
None of the information in the problem provides information concerning
heteroskedasticity. Note that heteroskedasticity occurs when the variance of the error
terms is not constant. When heteroskedasticity is present in a time series, the residuals
appear to come from different distributions (model seems to fit better in some time
periods than others).