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Exhibit 18.7.The following table shows the annual revenues (in millions of dollars)of a pharmaceutical company over the period 1990-2011. The autoregressive models of order 1 and 2,
and
,were applied on the time series to make revenue forecasts.The relevant parts of Excel regression outputs are given below.
Model AR(1): Model AR(2):
Refer to Exhibit 18.7.When for AR(1),H0: β0 = 0 is tested against HA: β0 ≠ 0,the p-value of this t test shown by Excel output is 0.9590.This could suggest that the model
.might be an alternative to the AR(1)model
.Excel partial output for this simplified model is:
Find the revenue forecast for 2012 through the use of
.
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