Exhibit 18.7.The following table shows the annual revenues (in millions of dollars)of a pharmaceutical company over the period 1990-2011. The autoregressive models of order 1 and 2, and ,were applied on the time series to make revenue forecasts.The relevant parts of Excel regression outputs are given below.
Model AR(1): Model AR(2): Refer to Exhibit 18.7.Compare Excel outputs for AR(1)and AR(2)and choose the forecasting model that seems to be better.

Question

Exhibit 18.7.The following table shows the annual revenues (in millions of dollars)of a pharmaceutical company over the period 1990-2011.  The autoregressive models of order 1 and 2,  and  ,were applied on the time series to make revenue forecasts.The relevant parts of Excel regression outputs are given below.
Model AR(1):  Model AR(2):  Refer to Exhibit 18.7.Compare Excel outputs for AR(1)and AR(2)and choose the forecasting model that seems to be better.

Quizplus · Accepted Answer

The Answer of Exhibit 18.7.The following table shows the annual revenues (in millions of dollars)of a pharmaceutical company over the period 1990-2011.  The autoregressive models of order 1 and 2,  and  ,were applied on the time series to make revenue forecasts.The relevant parts of Excel regression outputs are given below.
Model AR(1):  Model AR(2):  Refer to Exhibit 18.7.Compare Excel outputs for AR(1)and AR(2)and choose the forecasting model that seems to be better.