Financial Risk Manager Part 1

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A risk manager at a major global bank is conducting a time series analysis of equity returns. The manager wants to know whether the time series is covariance stationary. Which of the following statements describes one of the requirements for a time series to be covariance stationary?

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The distribution of a time series should have a kurtosis value near 3.0, ensuring no fat tails will distort stationarity.

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The distribution of a time series should have a skewness value near 0, so that its mean will fall in the center of the distribution.

The autocovariance of a covariance stationary time series depends only on displacement, τ, not on time.

When the autocovariance function is asymmetric with respect to displacement, τ, forward looking stationarity can be achieved.