A Time Series Regression Equation Measuring the Number of Surfboards

question 69

Multiple Choice

A time series regression equation measuring the number of surfboards sold by a surfboard manufacturing company in Australia is given below: Y = 35 + 4Q₁ + 0.5Q₃ + 8Q₄ + 3t
With t in quarters and the origin is December 2010 and Q₁ is the indicator variable for March, Q₃ is the indicator variable for September and Q₄ is the indicator variable for December.
Which of the following statements is correct?

• A) There is a mistake with this regression model because all the coefficients of the indicator variables are positive.
• B) There is no indicator variable for the June quarter in this model because there is no seasonal effect in June due to winter in Australia.
• C) There is a mistake with this model because the indicator variable for the June quarter has been left out.
• D) There is no indicator variable for the June quarter in this model because we need one less indicator variable than number of categories to use indicator variables with regression for a time series.

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