Question #15
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 6
Status: Unattempted
Correct Answer: B
Question
Trend models can be useful tools in the evaluation of a time series of data. However, there are limitations to their usage. Trend models are not appropriate when which of the following violations of the linear regression assumptions is present?
Answer Choices:
A. Model misspecification
B. Serial correlation
C. Heteroskedasticity
Explanation
One of the primary assumptions of linear regression is that the residual terms are not
correlated with each other. If serial correlation, also called autocorrelation, is present,
then trend models are not an appropriate analysis tool.