A time series regression equation measuring the number of surfboards sold by a surfboard manufacturing company in Australia is given below: Y = 35 + 4Q₁ + 0.5Q₃ + 8Q₄ + 3t With t in quarters and the origin is December 2010 and Q₁ is the indicator variable for March, Q₃ is the indicator variable for September and Q₄ is the indicator variable for December. Which of the following statements is correct? A)The coefficients of the indicator variables are all positive because the June Quarter has the lowest sales of surfboards. B)The coefficients of the indicator variables are all positive because sales of surfboards in the March, September and December quarter are all above June. C)The coefficients of the indicator variables are all positive indicating that the June quarter is seasonally disadvantaged for selling surfboards due to winter in Australia in this quarter. D)All of these choices are correct.

Question

Quizplus · Accepted Answer

The coefficients of the indicator variables for March, September, and December are all positive, suggesting these quarters have higher sales compared to the base quarter (June, by implication, since it's not listed). This could be due to June having the lowest sales (A), the sales in March, September, and December being above June (B), and the seasonal disadvantage of June due to winter in Australia (C). All these explanations are consistent with the positive coefficients for the other quarters, indicating higher sales in those quarters compared to June.

A Time Series Regression Equation Measuring the Number of Surfboards