Question #22
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 10
Status: Unattempted
Correct Answer: B
Question
Alexis Popov, CFA, wants to estimate how sales have grown from one quarter to the next on average. The most direct way for Popov to estimate this would be:
Answer Choices:
A. an AR(1) model with a seasonal lag
B. a linear trend model
C. an AR(1) model
Explanation
If the goal is to simply estimate the dollar change from one period to the next, the most
direct way is to estimate xt = b0 + b1 × (Trend) + et, where Trend is simply 1, 2, 3, ....T. The
model predicts a change by the value b1 from one period to the next.