Question #74
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 35
Status: Unattempted
Question
Which of the following statements regarding seasonality is least accurate?
Answer Choices:
A. The presence of seasonality makes it impossible to forecast using a time-series model
B. A time series that is first differenced can be adjusted for seasonality by incorporating the first-differenced value for the previous year's corresponding period
C. Not correcting for seasonality when, in fact, seasonality exists in the time series results in a violation of an assumption of linear regression
Explanation
ˆε2
t = a0 + a1ˆε2
t-1 + μt
The goal of a time series model is to identify factors that can be predicted. Seasonality in a
time series refers to patterns that repeat at regular intervals. When a time series exhibits
seasonality, seasonal lags should be included in the model in order to increase its
predictive ability.