Wal-Mart revenue. Each week about 100 million customers—

nearly one-third of the U.S. population—visit one of Wal-Mart’s U.S. stores. How does Wal-Mart’s revenue relate to the state of the economy in general? Here’s a regression table predicting Wal-Mart’s monthly revenue ($Billion) from the end of 2003 through the start of 2007 from the consumer price index (CPI ), and a scatterplot of the relationship.

a) The points plotted with x are the four December values.
We can construct a variable that is “1” for those four values and “0” otherwise. What is such a variable called?
Here’s the resulting regression.

b) What is the interpretation of the coefficient of the constructed variable December?

c) What additional assumption is required to include the variable December in this model? Is there reason to believe that it is satisfied?

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Dependent variable is: WM Revenue R-squared =11.4% R-squared (adjusted) 9.0% s 3.689 with 39 237 degrees of freedom Variable Intercept CPI Coeff -24.4085 SE (Coeff) t-ratio P-value 19.25 -1.27 0.2127 0.071792 0.0330 2.18 0.0358 WM_Revenue 28 24 22 20 16 x x 562.5 575.0 587.5 600.0 CPI