A Vector Autoregression

question 21

Multiple Choice

A vector autoregression

• A)is the ADL model with an AR process in the error term.
• B)is the same as a univariate autoregression.
• C)is a set of k time series regressions, in which the regressors are lagged values of all k series.
• D)involves errors that are autocorrelated but can be written in vector format.

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Definitions:

Equivalent Annual Annuity

The Equivalent Annual Annuity is a financial concept used to evaluate the annual return on an investment that has a different payment schedule, by converting it into an annuity with the same total present value.

Mutually Exclusive Projects

Investment projects where the acceptance of one project prevents the acceptance of another.

Capital Budgeting

The process by which investors or management assess potential large expenditures or investments to determine their profitability.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.