Consider the following to answer the question(s) below:
Monthly closing stock prices for a utility company were obtained from January 2007 through August 2008. A regression model was estimated to describe the trend in closing stock prices over time.
-What does the plot of residuals below suggest?
A) An outlier is present in the data set.
B) The linearity condition is not satisfied.
C) A high leverage point is present in the data set.
D) The data are not normal.
E) The equal spread condition is not satisfied.

Question

Consider the following to answer the question(s) below:
Monthly closing stock prices for a utility company were obtained from January 2007 through August 2008. A regression model was estimated to describe the trend in closing stock prices over time. 
-What does the plot of residuals below suggest?
A) An outlier is present in the data set. 
B) The linearity condition is not satisfied. 
C) A high leverage point is present in the data set. 
D) The data are not normal. 
E) The equal spread condition is not satisfied.

Quizplus · Accepted Answer

The plot of residuals suggests that the linearity condition is not satisfied, as the residuals do not appear to be randomly scattered around zero, indicating a potential non-linear relationship.

Consider the Following to Answer the Question(s) Below