I am confused as to the contradicting theories put across in the notes. At one place it says 'Using a Lagged Dependent Variable as an Independent Variable' leads to model misspecification.On the other hand AR models use a lagged dependent variable as an independent variable.What's the logic behind using either?

My understanding is that AR models are for time series data, whereas model msipecification arises from use of a lagged dependent variable as an independent variable in normal cross sectional regression.

Oh ok. That might make sense since they were from two different chapters.

A CFA Level 2 Discussion About AR Model (Quantitative Methods)

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This topic has 2 replies, 2 voices, and was last updated Mar-183:47 pm by RoyD.

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- Stuj79
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  17 Mar 2018 at 4:50 am
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  My understanding is that AR models are for time series data, whereas model msipecification arises from use of a lagged dependent variable as an independent variable in normal cross sectional regression.
- RoyD
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  17 Mar 2018 at 3:47 pm
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  Oh ok. That might make sense since they were from two different chapters.
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