Seasonal or cyclical variation in a time series model
A)is regular in nature and can be accounted for by dummy variables.
B)can decrease the accuracy of a forecast if not accounted for by dummy variables.
C)exhibits irregular variation that can be accounted for by dummy variables.
D)both a and b
E)both b and c

Question

Quizplus · Accepted Answer

Seasonal or cyclical variation is regular and predictable, making it possible to account for it using dummy variables in a time series model. This helps in improving the accuracy of forecasts by explicitly modeling the seasonal effects. Therefore, both statements A and B are correct.

Seasonal or Cyclical Variation in a Time Series Model