Question #1
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 1
Status: Unattempted
Correct Answer: B
Question
An analyst wants to model quarterly sales data using an autoregressive model. She has found that an AR(1) model with a seasonal lag has significant slope coefficients. She also finds that when a second and third seasonal lag are added to the model, all slope coefficients are significant too. Based on this, the best model to use would most likely be an:
Answer Choices:
A. ARCH(1)
B. AR(1) model with no seasonal lags
C. AR(1) model with 3 seasonal lags
Explanation
She has found that all the slope coefficients are significant in the model xt = b0 + b1xt– 1 +
b2xt– 4 + et. She then finds that all the slope coefficients are significant in the model xt = b0
+ b1xt– 1 + b2xt– 2 + b3xt– 3 + b4xt– 4 + et. Thus, the final model should be used rather than
any other model that uses a subset of the regressors.