If U_t Refers to the Error Term at Time 'T

question 22

Multiple Choice

If u_t refers to the error term at time 't' and y_{t - 1} refers to the dependent variable at time 't - 1', for an AR(1) process to be homoskedastic, it is required that:

• A)Var(u_t|y_{t - 1}) > Var(y_t|y_t-1) = ².
• B)Var(u_t|y_{t - 1}) = Var(y_t|y_t-1) > ².
• C)Var(u_t|y_{t - 1}) < Var(y_t|y_t-1) = ².
• D)Var(u_t|y_{t - 1}) = Var(y_t|y_t-1) = ².

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