After a Linear Forecasting Model Is Found for a Time

question 76

Multiple Choice

After a linear forecasting model is found for a time series, if the Durbin-Watson statistic is less than dL this means that:

• A) no positive autocorrelation exists, the linear model is adequate.
• B) positive autocorrelation exists, a nonlinear model should be tried.
• C) no positive autocorrelation exists, a nonlinear model should be tried.
• D) positive autocorrelation exists, the linear model is adequate.

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Definitions:

Expected Utility

A theory in economics that predicts the choices individuals will make by considering the risks and benefits of their options and selecting the one which offers the most utility.

Utility Function

A mathematical representation that describes how a consumer ranks different bundles of goods based on the level of satisfaction or utility they provide.

Risk Premium

The extra return or profit that an investor requires to hold riskier assets, over and above that of a risk-free asset.

Utility Function

A mathematical representation that shows the relationship between an individual’s consumption bundle and their level of satisfaction or utility.