Question #47 - Reading 2 Time-Series Analysis

Reading: Reading 2 Time-Series Analysis

PDF File: Reading 2 Time-Series Analysis.pdf

Page: 22

Status: Unattempted

Correct Answer: A

Shared Context

- Imagine that Johnson prepares a change-in-sales regression analysis model with seasonality, which includes the following: Coefficients Intercept −6.032 Lag 1 0.017 Lag 4 0.983 Based on the model, expected sales in the first quarter of 2015 will be closest to: A) 190. B) 210. C) 155.

Question

Johnson's model was most likely designed to correct for:

Answer Choices:

A. heteroskedasticity of model residuals

B. nonstationarity in time series data

C. cointegration in the time series

Explanation

Johnson's model transforms raw sales data by first differencing it and then modeling change in sales. This is most likely an adjustment to make the data stationary for use in an AR model.

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