Consider the following to answer the question(s) below:
Monthly closing stock prices for a utility company were obtained from January 2014 through August 2015. A regression model was estimated to describe the trend in closing stock prices over time.
-What does the plot of residuals above 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) Extrapolation was used.
E) There is no pattern. The relationship seems reasonably straight.

Question

Consider the following to answer the question(s) below:
Monthly closing stock prices for a utility company were obtained from January 2014 through August 2015. A regression model was estimated to describe the trend in closing stock prices over time. 
-What does the plot of residuals above 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) Extrapolation was used. 
E) There is no pattern. The relationship seems reasonably straight.

Quizplus · Accepted Answer

The presence of a pattern in the plot of residuals suggests that the relationship between the variables is not linear, indicating that the linearity condition is not satisfied.

Consider the Following to Answer the Question(s) Below