Quarterly sales figures for e-commerce retail sales were obtained from the first quarter
of 2001 through the fourth quarter of 2007. A regression model was estimated to
describe the trend in e-commerce retail sales over time.
a. Based on the plot of residuals versus predicted values, is the linear model
appropriate? Explain.
b. The Durbin-Watson statistic for this regression was found to be 1.727. What can you
conclude from this statistic?

Question

Quizplus · Accepted Answer

The Answer is a.The residual plot shows a curvature and the plot seems to thicken. The spread of
residuals increases as the value of the fitted value increases (over time). The linear model
does not appear to be appropriate.
b.There is no evidence of positive or negative autocorrelation.

Quarterly Sales Figures for E-Commerce Retail Sales Were Obtained from the First