Question #59
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 28
Status: Unattempted
Correct Answer: A
Question
Barry Phillips, CFA, has the following time series observations from earliest to latest: (5, 6, 5, 7, 6, 6, 8, 8, 9, 11). Phillips transforms the series so that he will estimate an autoregressive process on the following data (1, -1, 2, -1, 0, 2, 0, 1, 2). The transformation Phillips employed is called:
Answer Choices:
A. first differencing
B. beta drift
C. moving average
Explanation
Phillips obviously first differenced the data because the 1=6-5, -1=5-6, .... 1 = 9 - 8, 2 = 11 -
9.