2: Time Series Models

Question 1

Covariance stationary is when the mean & variance:

Answer 1

Do not change over time

Question 2

To test for Covariance Stationarity:

Answer 2

1. Plot data
2. Run an AR model
3. test correlations
4. Perform Dickey Fuller test

Question 3

Unit roots are eliminated by:

Answer 3

First differencing

Question 4

Use a log-linear trend model with:

Answer 4

constant % growth rates
or
exponential growth