CEA Data Analysis & Statistical Methods 4

Question 1

The Granger causality test in time-series econometrics determines whether:

Accepted Answer

Past values of one variable improve the prediction of another variable

Answer

Granger causality tests whether lagged values of variable X provide statistically significant information for forecasting variable Y, beyond Y's own lags.

Question 2

In principal component analysis (PCA), the first principal component:

Accepted Answer

Is the linear combination of variables that maximizes explained variance

Answer

The first principal component is the direction in variable space along which the data exhibit maximum variance, capturing the most information.

Question 3

A confidence interval that is constructed using a higher confidence level (e.g., 99% vs. 95%) will, all else equal, be:

Accepted Answer

Wider

Answer

Higher confidence requires a larger critical value (e.g., z = 2.576 for 99% vs. 1.96 for 95%), producing a wider interval that is less precise but more certain to contain the true parameter.

Question 4

The Augmented Dickey-Fuller (ADF) test is used to:

Accepted Answer

Test whether a time series has a unit root (is non-stationary)

Answer

The ADF test extends the original Dickey-Fuller test by including lagged differences to account for serial correlation when testing for a unit root.

Question 5

Which measure of central tendency is most affected by extreme outliers?

Accepted Answer

Arithmetic mean

Answer

The arithmetic mean incorporates every observation equally, so extreme values (outliers) can pull it substantially away from the center of the bulk of the data.

(CEA) Certified Economic Analyst Practice Test

(CEA) Certified Economic Analyst Practice Test

CEA Data Analysis & Statistical Methods 4