Question #32

Reading: Reading 2 Time-Series Analysis

PDF File: Reading 2 Time-Series Analysis.pdf

Page: 16

Status: Unattempted

Part of Context Group: Q32-34 First in Group
Shared Context
- Collier's supervisors would probably not want to use the results from the trend model for all of the following reasons EXCEPT: A) the model is a linear trend model and log-linear models are always superior. B) the slope coefficient is not significant. C) it does not give insights into the underlying dynamics of the movement of the dependent variable.
Question
For this question only, assume that Winston also ran an AR(1) model with the following results: yt = −0.9 − 0.23* yt −1 + et R-squared = 78.3% (0.823) (0.0222) The mean reverting level of this model is closest to:
Answer Choices:
A. 1.16
B. −0.73
C. 0.77
Explanation
The mean reverting level is X1 = bo/(1 − b1) X1 = −0.9/[1 − (−0.23)] = −0.73
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