David Wellington, CFA, has estimated the following log-linear trend model: LN(xt) = b0 + b1t + εt. Using six years of quarterly observations, 2001:I to 2006:IV, Wellington gets the following estimated equation: LN(xt) = 1.4 + 0.02t. The first out-of-sample forecast of xt for 2007:I is closest to: A) 1.88. B) 4.14. C) 6.69. I remembered the e, but forgot one part prior.
C?
= 1.4 + .02(6*4+1) = 1.9 then e^1.9
Yup! I totally overlooked the quarterly 6 years prior.
c?
yea, i totally overlooked it yesterday night. http://www.analystforum.com/phorums/read.php?12,959964
Damn. I totally missed the ‘quarterly’ part. Got the concept down, though. What’s next?