Instruction 14-16
Given Below Are Microsoft Excel Outputs for Various

question 134

Multiple Choice

Instruction 14-16
Given below are Microsoft Excel outputs for various estimated autoregressive (AR) models for a company’s real operating revenues (in billions of dollars) from 1985 to 2008. From the data, you also know that the real operating revenues for 2006, 2007 and 2008 are 11.7909, 11.7757 and 11.5537, respectively.
AR (1) Model:
$\begin{array}{|l|l|l|l|l|}\hline & \text { Coefficients } & \text { Standard Error } & \text { t Stat } & p \text {-value } \\\hline \text { Intercept } & 0.1802 & 0.3980 & 0.4528 & 0.6553 \\\hline \text { XLag1 } & 1.0112 & 0.0497 & 20.3526 & 0.0000 \\\hline\end{array}$

AR (2) Model:
$\begin{array}{|l|l|l|l|l|}\hline & \text { Coefficients } & \text { Standard Error } & \text { t Stat } & p \text {-value } \\\hline \text { Intercept } & 0.3005 & 0.4408 & 0.6817 & 0.5036 \\\hline \text { X Lag 1 } & 1.1732 & 0.2347 & 4.9980 & 0.0001 \\\hline \text { X Lag 2 } & -0.1830 & 0.2507 & -0.7300 & 0.4743 \\\hline\end{array}$

AR (3) Model:
$\begin{array}{|l|l|l|l|l|}\hline & \text { Coefficients } & \text { Standard Error } & \text { t Stat } & p \text {-value } \\\hline \text { Intercept } & 0.3130 & 0.5144 & 0.6085 & 0.5509 \\\hline \text { XLag1 } & 1.1737 & 0.2465 & 4.7617 & 0.0002 \\\hline \text { XLag2 } & -0.0694 & 0.3731 & -0.1860 & 0.8547 \\\hline \text { XLag3 } & -0.1221 & 0.2820 & -0.4330 & 0.6704 \\\hline\end{array}$

-Referring to Instruction 14-16 and using a 5% level of significance,what is the appropriate AR model for the company's real operating revenue?

• A) AR(1)
• B) AR(2)
• C) AR(3)
• D) Any of the above

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Definitions:

Self-esteem

One's subjective evaluation of their own worth or the degree to which they value themselves.

Spotlight Effect

The idea that other people are focusing more on how we look and act than they actually are.

Flattering Descriptions

Positive and often exaggerated comments that make someone or something seem better or more attractive than they are in reality.

Self-serving Bias

A common cognitive bias that causes individuals to perceive situations and interpret information in a way that benefits them or supports their pre-existing beliefs or interests.