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Consider the following linear trend models estimated from 10 years of quarterly data with and without seasonal dummy variables d . d2, and d3. Here,
Consider the following linear trend models estimated from 10 years of quarterly data with and without seasonal dummy variables d . d2, and d3. Here, d1=1 for quarter 1,0 otherwise; other dummy variables are defined similarly. Model 1: y=50.00+0.39t Model 2: 9=50.00+0.59t0.40d10.38d20.18d3 a. Use each model to make a forecast for y for the first and the fourth quarters of the 1tth year. Note: Round your answers to 2 decimal places. b. Which is the preferred model for forecasting if, relative to Model 1 , Model 2 has higher R2 but lower adjusted R2
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