SCENARIO 13-5
The managing partner of an advertising agency believes that his company's sales are related to the
industry sales.He uses Microsoft Excel to analyze the last 4 years of quarterly data with
the following results: Durbin-Watson Statistic 1.59
-Referring to Scenario 13-5, the partner wants to test for autocorrelation using the Durbin-Watson
Statistic.Using a level of significance of 0.05, the decision he should make is:
A) there is evidence of autocorrelation.
B) the test is unable to make a definite conclusion.
C) there is no evidence of autocorrelation.
D) there is not enough information to perform the test.

Question

SCENARIO 13-5
The managing partner of an advertising agency believes that his company's sales are related to the
industry sales.He uses Microsoft Excel to analyze the last 4 years of quarterly data with
the following results:  Durbin-Watson Statistic 1.59
-Referring to Scenario 13-5, the partner wants to test for autocorrelation using the Durbin-Watson
Statistic.Using a level of significance of 0.05, the decision he should make is:
A) there is evidence of autocorrelation. 
B) the test is unable to make a definite conclusion. 
C) there is no evidence of autocorrelation. 
D) there is not enough information to perform the test.

Quizplus · Accepted Answer

The Durbin-Watson statistic is used to test for autocorrelation in a time series. A value of 2 indicates no autocorrelation, a value less than 2 indicates positive autocorrelation, and a value greater than 2 indicates negative autocorrelation. In this case, the Durbin-Watson statistic is 1.98, which is less than 2. This indicates that there is positive autocorrelation in the time series.

SCENARIO 13-5 The Managing Partner of an Advertising Agency Believes That His