Question #80
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 39
Status: Unattempted
Question
Suppose that the following time-series model is found to have a unit root: Salest = b0 + b1 Sales t-1+ εt What is the specification of the model if first differences are used?
Answer Choices:
A. Salest = b0 + b1 Sales t-1 + b2 Sales t-2 + εt
B. (Salest - Salest-1)= b0 + b1 (Sales t-1 - Sales t-2) + εt
C. Salest = b1 Sales t-1+ εt
Explanation
Estimation with first differences requires calculating the change in the variable from
period to period.