Question #65 - Reading 2 Time-Series Analysis

Reading: Reading 2 Time-Series Analysis

PDF File: Reading 2 Time-Series Analysis.pdf

Page: 32

Status: Unattempted

Correct Answer: A

Shared Context

- Are either of the slope coefficients statistically significant? A) The simple trend regression is not, but the log-linear trend regression is. B) Yes, both are significant. C) The simple trend regression is, but not the log-linear trend regression.

Question

With respect to the possible problems of autocorrelation and nonstationarity, using the log- linear transformation appears to have:

Answer Choices:

A. not improved the results for either possible problems

B. improved the results for nonstationarity but not autocorrelation

C. improved the results for autocorrelation but not nonstationarity

Explanation

The fact that there is a significant trend for both equations indicates that the data is not stationary in either case. As for autocorrelation, the analyst really cannot test it using the Durbin-Watson test because there are fewer than 15 observations, which is the lower limit of the DW table. Looking at the first-order autocorrelation coefficient, however, we see that it increased (in absolute value terms) for the log-linear equation. If anything, therefore, the problem became more severe.

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