Answered step by step
Verified Expert Solution
Question
1 Approved Answer
In attempting to forecast future quarterly sales of a company, you fail to reject the unit-root hypothesis on the series of In(sales in millions), so
In attempting to forecast future quarterly sales of a company, you fail to reject the unit-root hypothesis on the series of In(sales in millions), so instead run a regression on the first differences in the log of sales. The coefficient estimates are as follows: The most recent quarterly sales figure is 7.52 million, and the one before that is 7.78 million. Based on the regression coefficients, what is your forecast for the next quarter's sales? Hint: the regression model allows you to easily forecast the difference in In(sales), specifically ln(St+1)ln(St), based on the coefficients and the previous difference in sales, ln(St)ln(St1) Once you have that forecast, use some algebra to rearrange and solve for St+1
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started