First differences transformation is best used when:
A) There appears to be a linear direction (trend) in the data
B) The data are wildly fluctuating
C) The data are not autocorrelated
D) None of the above

Question

Quizplus · Accepted Answer

First differences transformation is best used when there appears to be a linear direction (trend) in the data, as it helps to stabilize the mean of a time series by removing changes in the level of a time series, making the series stationary.

First Differences Transformation Is Best Used When