SCENARIO 16-13 Given below is the monthly time series data for U.S.retail sales of building materials over a specific year. The results of the linear trend, quadratic trend, exponential trend, first-order autoregressive, second-order autoregressive and third-order autoregressive model are presented below in which the coded month for the month is 0: Below is the residual plot of the various models:
-Referring to Scenario 16-13, the best model based on the residual plots is the second-order autoregressive model.

Question

SCENARIO 16-13 Given below is the monthly time series data for U.S.retail sales of building materials over a specific year.  The results of the linear trend, quadratic trend, exponential trend, first-order autoregressive, second-order autoregressive and third-order autoregressive model are presented below in which the coded month for the  month is 0:  Below is the residual plot of the various models: 
-Referring to Scenario 16-13, the best model based on the residual plots is the second-order autoregressive model.

Quizplus · Accepted Answer

The residual plot of the second-order autoregressive model shows more random scatter around 0 and less systematic patterns compared to the other models. Therefore, it is the best model based on the residual plots. From the residual plot, it can be observed that the second-order autoregressive model has the least amount of variation in its residuals, indicating that it is the best model among the ones considered. Therefore, the statement is true.

SCENARIO 16-13 Given Below Is the Monthly Time Series Data