Exhibit 18

question 95

Essay

Exhibit 18.8.Quarterly sales of a department store for the last 7 years are given in the following table. The Excel scatterplot shown above indicates that the quarterly sales have an increasing trend and seasonality.Therefore,the linear regression model,Sales = β₀ + β₁Qtr1 + β₂Qtr2 + β₃Qtr3 + β₄t + ε with three seasonal dummy variables Qtr1,Qtr2 and Qtr3,and the decomposition method are proposed to make sales forecasts.For the regression model,the following Excel partial output is available. Refer to Exhibit 18.8.Using the regression equation for the linear trend model with seasonal dummy variables,what can be said about the sales in Quarter 4 compared to the sales in Quarter 1?

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Definitions:

Residual Standard Deviation

A statistical measure that quantifies the amount by which an observed variable differs from its estimated value.

Sharpe's Measure

A risk-adjusted performance metric that measures the excess return per unit of deviation in an investment asset or portfolio.

Residual Standard Deviation

A measure of the amount by which each observed value in a data set differs from the average of those values.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher volatility than the market, while a beta less than 1 indicates lower.