Assume That You Are Trying to Model the Relationship Between

question 1

Multiple Choice

Assume that you are trying to model the relationship between house prices and rents. If you find that both series are non-stationary and a linear combination of the two series is stationary, which of the following is true?
(I) Regressing the levels of house prices on the levels of rents could lead to spurious regressions
(II) House prices and rents are cointegrated
(III) An appropriate linear combination of house prices and rents is I(1)
(IV) House prices and rents are not cointegrated

• A) I only
• B) I and II only
• C) I, II and III only
• D) I, II, III and IV only

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Definitions:

Isolation

The process of separating sick individuals from healthy ones to prevent the spread of diseases.

Denial

A psychological defense mechanism where a person refuses to accept reality or facts, often as a way to avoid dealing with uncomfortable emotions or situations.

Aggression

Behaviors or attitudes that are forceful, hostile, or attacking, often indicating readiness to confront or engage.

Depression

A mental health disorder characterized by persistently depressed mood or loss of interest in activities, causing significant impairment in daily life.