450 Final

Using a series that has 500 observations, suppose an analyst estimates the first autocorrelation coefficient equals 0.14. This value is statistical significant at the 95% level of confidence.

True

We use the MSE, MAE, and MAPE to determine the best univariate time series forecasting model.

True

Which of the following statements are correct? a. Autocorrelations measure the similarity between observations as a function of the time lag between them. b. The analysis of autocorrelations is a mathematical tool for finding repeating patterns.

c. all of the above are correct.

Consider a population shock that increases the demand for owner-occupied housing in a city. Ceteris paribus, in the very short-run equilibrium, which of the following is true?

a. House prices rises.

Which of the following statements are correct?

a. Static forecasting uses the observed value of Yt+1 to form forecasts of Yt+2.

Consider a sample size of 79 observations. The 95% confidence interval to determine the statistical significance of an autocorrelation is equal to:

b. (-0.22, 0.22)

Consider yt = m + δ1yt-1 + δ2yt-2 + εt ; this econometric specification represents which of the following processes:

b. AR(2)

Suppose a shock at time t affects values in the current period and one period into the future. What type of process is this?

b. An MA(1).

Suppose an analyst is working on a forecasting problem for which large forecast errors are more serious that small forecast errors. In this case, which of the following forecast diagnostics should she use when choosing the best forecasting model?

b. Mean Squared Error (MSE).

Which of the following is an example of real estate traded by investors in public equity markets?

b. Real Estate Investment Trusts (REITs)

Why is the long-run housing supply curve nearly vertical in some U.S. cities?

b. Some U.S. cities heavily regulate how the city's housing stock can be increased.

Which of the following statements are true for the following Random Walk process: yt = m + fyt-1 + ut a. If the autocorrelation coefficient exceeds one then yt is an explosive series and shocks become more influential as time goes on. b. If the autocorrelation coefficient equals one then yt is a Random Walk. c. If the autocorrelation coefficient is less than one then yt is a Random Walk.

d. A and B are correct.

Which of the following statements is correct?

b. The method of ordinary least squares computes the coefficient estimates by finding the values that minimizing the sum of the squared regression errors.

In which of the following markets do tenants negotiate rent and other terms with property owners or their managers?

b. User Market

In which of the following markets are the required rates of return on available investment opportunities determined?

c. Capital Market

The following time series specifications represents what time-series process: yt = m + qut-1 + ut

c. MA(1).

Which of the following models represents an AR(2)?

c. Model (3): yt = a + δ1yt-1 + δ2yt-2 + ut

Consider an income shock that increases the demand for rental units in a city, ceteris paribus. If the long-run apartment supply curve is horizontal, which of the following is true at the new long-run equilibrium?

c. Rents are the same as the pre-shock level.

Which of the following statements about real estate markets are correct? a. The long-run housing supply curve nearly vertical in some U.S. cities. b. The demand for funds in the global capital market can affect property valuation in Ames, IA. c. REITs are an example of private equity real estate.

All of the above are correct.

"In-sample" estimation means estimating over the holdout period.

False

"Out of sample" forecasting is the practice of predicting future values of a series

False

A diversified investor will only be concerned with an asset's indiosyncratic risk

False

As an investor in public debt real estate, you lend funds to an owner or purchaser of real estate

False

Capital markets are globally integrated but the real estate property market is not.

False

If a series is white noise, it has very few statistically significant AC or PACs, typically four or less.

False

If the autocorrelation in an AR(1) model equals 1 then the effect of past shocks on current values eventually dies out.

False

In markets with elastically supplied housing, demand shocks drive price cycles.

False

Investors in private equity real estate lend funds to an owner, developer or purchaser of real estate.

False

The Fama French 3 factor model expands the CAPM for momentum.

False

The Null Hypothesis in an Augmented Dickey Fuller (ADF) test is that the series is stationary.

False

To choose the best fitting univariate time series model, one chooses the model with the maximum Akaike Information Criterion (AIC) value.

False

Value stocks trade at a high price relative to the firm's fundamentals.

False

Consider the basic regression model: Y =α + βX + ε, where ε denotes the random error. Which of the following statements is correct? a. Y is the dependent variable observed from real world data. b. X is the independent variable observed from real world data. c. β is a parameter to be estimated.

. All of the above are correct.

The following time series specifications represents what time series process: yt = m + δ1yt-1 + δ2yt-2 + θ1ut-1 + ut

ARMA(2,1)

The following time series specifications represent what time-series process: yt = m + qut-1 + ut

MA(1)

Which of the following statement is correct? a. Highly diversified portfolios have almost no unsystematic risk. b. A diversified investor will only be concerned with systematic risk. c. Idiosyncratic risk cannot be eliminated by diversification

A and B are correct

Consider a data series with 443 observations. The "Rule of Thumb" 95% confidence interval for the series' autocorrelation coefficients is (-0.093, 0.093).

True

Consider the supply and demand model for rental units. The curve representing user demand for housing shifts rightward if consumer income rises.

True

Debt participants in real estate markets hold claims to the interest on borrowed funds that are secured by a property.

True

Due to large size of typical RE investments, investors almost always pool their equity capital.

True

A "value stock" has a book to market value greater than 1.

True

A "value stock" trades at a lower price relative to its fundamentals.

True

A coefficient estimate with a p-value = 0.0012 is statistically significant at the 99% level

True

A covariance stationary series has a constant mean, variance, and covariances (by lag/lead j).

True

A dynamic relationship is one in which the change in a variable now has an impact on that same variable in one or more future time periods.

True

A structural empirical model is a regression model where the control variables are specified using theory

True

If a correlogram reveals a statistically significant pattern in the data then the series is not white noise.

True

If a correlogram reveals no statistically significant pattern in the data then the series is white noise.

True

If the adjusted R^2 is close to 1, the model "fits well"

True

In an AR(2) model, in order to forecast out 3 periods, the method of dynamic forecasting uses forecasted values (Yt+1,Yt+2) for the unobserved lagged dependent variable in forming the forecast of Yt+3

True

In an MA(1) model a shock at time t affects values in the current period and one period into the future.

True

In hypothesis testing, a "Type I Error" occurs when the data scientist rejects a true null hypothesis.

True

In hypothesis testing, the "Level of Significance is the probability of making a Type I error

True

In the following model regressing stock excess return on the market excess return: Y = a + Bx + E, if a stock has a positive and significant alpha it is considered to be underpriced

True

MSE is used to determine the best univariate forecasting model when large forecast error are more serious that smaller forecast errors.

True

Publicly traded, equity real estate investment trusts (REITs) own, and in most cases operate, income-producing real estate and list shares on the major U.S. stock exchanges.

True

Real estate user markets are local and segmented.

True

Recall, the total return on an asset equals the expected return plus any unexpected return. The unexpected return can be positive or negative, but will be zero on average

True

Relevant information known today is reflected in the expected return of a security

True

Shocks affect future values of an ARMA process directly through the MA terms and indirectly through the AR terms.

True

The Mean Squared Error (MSE) is one measure used to determine the best time series forecasting model

True

The alpha estimated with an incomplete asset pricing model specification may reflect exposure to omitted factors instead of the manager's portfolio selection.

True

The alpha estimated with an incomplete model specification may reflect exposure to omitted factors instead of the manager's security selection.

True

The best-fitting model may not be the best forecasting model.

True

The goal of univariate time series analysis is to predict the future value of a series, {Yt}, using only information contained in the series' past values.

True

The key statistical metric for choosing the best fitting regression model is the adjusted R squared

True

Time series models are called "A-theoretical" because they are not based on a theoretical model about behaviour.

True

Time series models are preferred to structural models when explanatory variables are unobservable.

True

To induce stationarity, one should "first-difference" data that have a unit root.

True

Total risk is measured by the variance and standard deviation of the return

True

Which of the following statements is correct?

a. An increase from 40% to 44% is a 4 percentage point increase.

Consider the basic regression model: Y =α + βX + ε, where ε denotes the random error. Which of the following statements is correct? a. If β = 0 there is no correlation between X on Y. b. If β > 0 there is a positive or direct correlation between X and Y. c. If β < 0 there is a negative or indirect correlation between X and Y.

d. All of the above are correct.

Using a series that has 280 observations, suppose an analyst estimates the first three autocorrelations equal: 1st = 0.68, 2nd = -0.24 and 3rd = 0.125. Which of these are statistically significant at the 95% level of confidence?

d. All three autocorrelations.

Fama French 3 Factor Model expands the CAPM for two additional risk factors. What are they?

d. firm size and book-to-market value.

According to the Capital Asset Pricing Model (CAPM), a security's expected return is determined by which of the following? a. The time value of money, measured by the risk free rate. b. The reward for bearing systematic risk, measured by the market risk premium. c. The amount of total risk involved in holding the asset.

e. A and B are correct.

PVALUES. For which of the given p-values would the Null Hypothesis be rejected at a 90 percent level of confidence? a. p-value = 0.010 b. p-value = 0.052 c. p-value = 0.083 d. p-value = 0.100

e. all of the above.

Which of the following statements is correct? a. Time series models are called "A-theoretical" because they are based on a theoretical model about behaviour. b. A dynamic relationship occurs when a shock affects a variable in the present time period and in one or more future time periods. c. Time series models are preferred to structural models when explanatory variables are unobservable.

f. B and C only are correct.

Which of the following factors would put upward pressure on property values and lead to an increase in real estate development? a. An increase in the demand for rental space. b. A decrease in the costs of housing construction. c. An increase in regulatory restrictions on new housing. d. A decrease in the discount rate.

g. A and D only are correct.