Figure 6 shows the quarterly sales of Cisco Systems from 1Q:1991 to 4Q:2000.
FIGURE 6 Quarterly Sales at Cisco

Table 6 gives the regression statistics from estimating the model Δln (Sales t) = b0 + b1Δln (Salest ˆ’1) + ε t.
TABLE 6 Change in the Natural Log of Sales for Cisco Systems Quarterly Observations,
3Q:1991-4Q:2000
Regression Statistics
R-squared..............................0.2899
Standard error..........................0.0408
Observations.................................38
Durbin-Watson........................1.5707

A. Describe the salient features of the quarterly sales series.
B. Describe the procedures we should use to determine whether the AR(1) specification is correct.
C. Assuming the model is correctly specified, what is the long-run change in the log of sales toward which the series will tend to converge?

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Millions of Dollars 7000 6000 5000 4000 3000 2000 1000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year Coefficient Standard Error t-Statistic Intercept Aln (Sales, -1) 0.0661 0.0175 3.7840 0.4698 0.1225 3.8339