Question #44 - Reading 2 Time-Series Analysis

Reading: Reading 2 Time-Series Analysis

PDF File: Reading 2 Time-Series Analysis.pdf

Page: 21

Status: Unattempted

Correct Answer: A

Shared Context

- Morris concludes that the current price of Car-tel stock is consistent with single stage constant growth model (with g=3%). Based on this information, the sales model is most likely: A) Incorrectly specified and first differencing the data would be an appropriate remedy. B) Correctly specified. C) Incorrectly specified and first differencing the natural log of the data would be an appropriate remedy. Bill Johnson, CFA, has prepared data concerning revenues from sales of winter clothing made by Polar Corporation. This data is presented (in $ millions) in the following table: Change In Sales Lagged Change In Sales Seasonal Lagged Change In Sales Quarter Sales Y Y + (−1) Y + (−4) 2013.1 182 2013.2 74 −108 2013.3 78 4 −108 2013.4 242 164 4 2014.1 194 −48 164 2014.2 79 −115 −48 −108 2014.3 90 11 −115 4 2014.4 260 170 11 w

Question

The preceding table will be used by Johnson to forecast values using:

Answer Choices:

A. an autoregressive model with a seasonal lag

B. a serially correlated model with a seasonal lag

C. a log-linear trend model with a seasonal lag

Explanation

Johnson will use the table to forecast values using an autoregressive model for periods in succession since each successive forecast relies on the forecast for the preceding period. The seasonal lag is introduced to account for seasonal variations in the observed data.

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