Which statement is most nearly correct regarding time-series trend models? A)The quadratic model is best for a series that is growing by a constant percentage. B)A linear model may yield a higher R² than a quadratic model. C)The exponential model is rarely used for financial data. D)The exponential model would be linear if we take the natural log of y_t.

Question

Quizplus · Accepted Answer

The statement that the exponential model would be linear if we take the natural log of y_t is true. This is because taking the natural log of the exponential model results in a linear relationship between the dependent variable (ln(y)) and the independent variable (t). The other statements are incorrect: A) the exponential model is often used for financial data, B) a quadratic model may yield a higher R-squared than a linear model, but this does not necessarily mean it is a better model choice, and C) the quadratic model is better for a series that is growing by a constant rate, not a constant percentage.

Which Statement Is Most Nearly Correct Regarding Time-Series Trend Models