AB1202 – Statistics and Quantitative Methods In-Lecture Exercise Solutions

AB1202 – STATISTICS AND QUANTITATIVE METHODS

In-Lecture Exercise (ILE) Solutions (Week 12)
Lecture 12 – Time Series Predictive Models

Q1. In time series regression, we normally:

(a) choose any suitable explanatory variable X to explain the variations observed
in the response variable Y
(b) use the model to interpolate for values of response variable Y
(c) extrapolate on the right-side of x-axis of the model [CORRECT]

Q2. A time series regression model produced a series of predicted values y^_i : 12, 16,
13, 15 when the corresponding observed response values were y_i : 11, 18, 14, 12.
Calculate the RMSE of the model with this data.
(a) 3.75
(b) 1.75
(c) 1.9365 [CORRECT]

Q3. A time series regression model, G, generated error series as follows e_i : +5, -3, +2,
+1. Another model, J, generated error series as follows f_i : -4, -2, +1, +1, where i = 1, 2,
3, 4. What are their MSEs and which model is better when evaluated using MSE?
(a) MSE_G = 2.75, MSE_J = 2. J is better
(b) MSE_G = 9.75, MSE_J = 5.5. J is better [CORRECT]
(c) MSE_G = 5, MSE_J = -4. G is better

Q4. Give the time series regression model for the following data:
t = 1, 2, 3, 4, 5,
Y = 12, 15, 13, 19, 15.
(a) y = 11.8 + t [CORRECT]
(b) y = 1 + 11.8 t
(c) y = -2.1389 + 0.3472 t

Q5. Which is NOT true about autocorrelation in the following statements?

(a) Autocorrelation may be positive or negative in nature
(b) Autocorrelation shows the existence of correlation between the response data
values (y) with time (t) [CORRECT]
(c) Autocorrelation is the occurrence of strong correlation between subsequent
error values

Q6. Which is the best description when there is significant positive autocorrelation in a
time series model?
(a) Successive errors tend to become larger and larger [CORRECT]
(b) Successive errors tend to swing back and forth from positive to negative and
back to positive
(c) Errors occur more and more frequently as time passes

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AB1202 – Statistics and Quantitative Methods In-Lecture Exercise Solutions

Q7. A time series regression model generated an error series e_i = +2, -1, -2, -5, 0, 2, 1.
Calculate the lag-1 Durbin-Watson test statistic DW.
(a) DW = 0.2
(b) DW = 1.4 [CORRECT]
(c) DW = 0.7143

Q8. In a lag-1 Durbin-Watson test for negative autocorrelation involving sample size of 30
and significance level of 5%, if the test statistic DW was 2.81, what would be our test
conclusion? (Use lecture slide 9 for critical values)
(a) Inconclusive
(b) Do not reject null hypothesis and conclude that there is no negative
autocorrelation at 5% significance
(c) Reject null hypothesis and conclude that there is negative autocorrelation at
5% significance [CORRECT]

Q9. An error series e_i was generated by a time series regression model. Sample
coefficient of correlation of e_i and its lag-1 error series e_(i-1) was calculated to be 0.8581
(ie Correl_sample(e_i, e_(i-1)) ). What is an estimate of Durbin-Watson test statistic?
(a) 0.7363
(b) 0.2838 [CORRECT]
(c) 0.5273

Q10. The following time series data was observed:

t =1 , 2 , 3 , 4 , 5
y_t = 3 , 5 , 8 , 6 , 7
Find an AR(1) regression model with this data.
(a) y_t = 5.6538 + 0.1538 y_(t-1) [CORRECT]
(b) y_t = 2.9 + 0.4 y_(t-1)
(c) y_t = 3.1 + 0.9 t

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