TABLE 16-11
The manager of a health club has recorded mean attendance in newly introduced step classes over the last 15 months: 32.1, 39.5, 40.3, 46.0, 65.2, 73.1, 83.7, 106.8, 118.0, 133.1, 163.3, 182.8, 205.6, 249.1, and 263.5. She then used Microsoft Excel to obtain the following partial output for both a first- and second-order autoregressive model.
-Referring to Table 16-11, based on the parsimony principle, the second-order model is the better model for making forecasts.

Question

TABLE 16-11
The manager of a health club has recorded mean attendance in newly introduced step classes over the last 15 months: 32.1, 39.5, 40.3, 46.0, 65.2, 73.1, 83.7, 106.8, 118.0, 133.1, 163.3, 182.8, 205.6, 249.1, and 263.5. She then used Microsoft Excel to obtain the following partial output for both a first- and second-order autoregressive model. 
-Referring to Table 16-11, based on the parsimony principle, the second-order model is the better model for making forecasts.

Quizplus · Accepted Answer

The parsimony principle suggests choosing the simplest model that adequately fits the data. A second-order model is more complex than a first-order model, so unless it significantly improves the fit, it is not considered better based on parsimony.

TABLE 16-11 The Manager of a Health Club Has Recorded Mean Attendance