Chartered Financial Analyst Level 2
Get started today
Ultimate access to all questions.
Comments
Loading comments...
Ultimate access to all questions.
An analyst estimates an AR(2) model for the monthly sales of a company and calculates the squared residuals from this regression. To test for the presence of ARCH(1) in the residuals, the analyst should regress the squared residuals on a constant and:
A
a time trend, and test whether the time trend coefficient is statistically different from 0.
B
one lag of the squared residuals, and test whether the slope coefficient is statistically different from 0.
C
one lag of the squared residuals, and test whether the slope coefficient is statistically different from 1.