CFA CFA Level 2 AR Model (Quantitative Methods)

AR Model (Quantitative Methods)

  • This topic has 2 replies, 2 voices, and was last updated Mar-18 by Avatar of RoyDRoyD.
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      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?

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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.

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

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