A time series regression equation measuring the number of surfboards sold by a surfboard manufacturing company in Australia is given below: Y = 35 + 4Q₁ + 0.5Q₃ + 8Q₄ + 3t With t in quarters and the origin is December 2010 and Q₁ is the indicator variable for March, Q₃ is the indicator variable for September and Q₄ is the indicator variable for December. Which of the following statements is correct? A) The coefficients of the indicator variables are all positive because the June Quarter has the lowest sales of surfboards. B) The coefficients of the indicator variables are all positive because sales of surfboards in the March, September and December quarter are all above June. C) The coefficients of the indicator variables are all positive indicating that the June quarter is seasonally disadvantaged for selling surfboards due to winter in Australia in this quarter. D) All of these choices are correct.

Question

Quizplus · Accepted Answer

The positive coefficients for Q1, Q3, and Q4 indicate higher sales in these quarters compared to the June quarter, which is not represented by an indicator variable. This suggests that the June quarter has the lowest sales, likely due to winter in Australia.

A Time Series Regression Equation Measuring the Number of Surfboards