A time series regression equation for 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 regarding the coefficient of Q₄? A)This company expects to sell 8 more surfboards in the December quarter than in the March quarter or the September quarter. B)This company expects to sell 8 more surfboards in the December quarter than in the June quarter. C)This company expects to sell 8 more surfboards in the June quarter than in the December quarter. D)None of these choices are correct.

Question

Quizplus · Accepted Answer

The coefficient of Q₄ (8) indicates the expected increase in sales in the December quarter compared to the baseline quarter, which is not explicitly mentioned but is implied to be any quarter other than March, September, or December. Since June is not represented by any of the indicator variables, it serves as part of the baseline against which December's increase is measured.

A Time Series Regression Equation for a Surfboard Manufacturing Company