Question #71
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 34
Status: Unattempted
Question
Suppose that the time series designated as Y is mean reverting. If Yt+1 = 0.2 + 0.6 Yt, the best prediction of Yt+1 is:
Answer Choices:
A. 0.5
B. 0.8
C. 0.3
Explanation
The prediction is Yt+1 = b0 / (1-b1) = 0.2 / (1-0.6) = 0.5