How many indicator variables are required if there are p seasons in a time series and you are forecasting with a seasonal regression model?
A) p − 1
B) p
C) p + 1
D) p + 2

Question

Quizplus · Accepted Answer

In a seasonal regression model with p seasons, p − 1 indicator variables are required. This is because one season can be inferred if the other (p − 1) seasons are known, avoiding the dummy variable trap and ensuring the model is not over-specified.

How Many Indicator Variables Are Required If There Are P