Question #18
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 7
Status: Unattempted
Correct Answer: A
Question
An analyst modeled the time series of annual earnings per share in the specialty department store industry as an AR(3) process. Upon examination of the residuals from this model, she found that there is a significant autocorrelation for the residuals of this model. This indicates that she needs to:
Answer Choices:
A. revise the model to include at least another lag of the dependent variable
B. switch models to a moving average model
C. alter the model to an ARCH model
Explanation
She should estimate an AR(4) model, and then re-examine the autocorrelations of the
residuals.