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Q1. If the lines below represent s2, AIC and SIC for the same sample size, the AIC and SIC respectively are
represented by:
Ans: B, SIC has the largest penalty therefore steepest, followed by AIC which has a bigger penalty than s2
Q2. Which of the following is the most consistent criteria for selecting a model:
A. s2
B. SIC
C. AIC
D. MSE
Ans: B, Of the four options SIC is most consistent as it has the largest penalty for degrees of freedom.
Q3. Which of the following represents the penalty factor according to SIC:
A.
B.
C.
D. 1
Ans: C
Characterizing Cycles
Q4. Which of the following is not a necessary condition for a time series to be covariance stationary?
A. Constant and finite expected value
C. Zero mean
Ans: C, The mean for a covariance stationary process needs to be constant and not necessarily zero
A. Constant mean
B. Constant variance
C. Finite variance
D. No serial correlation
Q6. Which of the following Q-statistics work better with limited data?
A. Box-Pierce
B. Ljung-Box
D. Neither is useful
Ans: B, by incorporating weights Liung-Box has a better chance of picking the right model compared to
the Box-Pierce method
A. Help evolve the relationship between lagged data and future data
Ans: D, lag operators use past and present data that is insample to estimate out of sample future data
Modeling Cycles
Q8. The order of the MA process with the following data is:
Lag Autocorrelation t-Statistic
1 1.4609 –6.8912
2 1.4384 5.4589
3 1.4589 6.1204
4 0.9875 –6.2345
5 0.0356 0.0132
A. 2
B. 3
C. 4
D. 5
Ans: C, Cutoff happens at the degree at which the mean autocorrelation becomes statistically
insignificant
A. MA process only
Ans: B, MA processes always exhibit a autocorrelation cutoff corresponding to the degree of the model
A.
B.
C.
D.
Ans: C
B. 2
C. 4
D. 5
Ans: B, order is defined by number of lagged values considered and not the degree of lag
Q12. Which of the following statements regarding ARMA process are not true?
D. The ARMA process doesn’t consider the lagged values of the independent variable
Ans: B, There could be periodic spikes in autocorrelations because of the MA component of the process.
ARMA considers lagged values of the dependent variable