Question #68
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 33
Status: Unattempted
Correct Answer: A
Question
Barry Phillips, CFA, is analyzing quarterly data. He has estimated an AR(1) relationship (xt = b0 + b1 × xt-1 + et) and wants to test for seasonality. To do this he would want to see if which of the following statistics is significantly different from zero?
Answer Choices:
A. Correlation(et, et-5)
B. Correlation(et, et-4)
C. Correlation(et, et-1)
Explanation
Although seasonality can make the other correlations significant, the focus should be on
correlation(et, et-4) because the 4th lag is the value that corresponds to the same season
as the predicted variable in the analysis of quarterly data.