Which of the following is a seasonally adjusted model? A) (Salest - Sales t-1)= b0 + b1 (Sales t-1 - Sales t-2) + b2 (Sales t-4 - Sales t-5) + εt. B) Salest = b0 + b1 Sales t-1 + b2 Sales t-2 + εt. C) Salest = b1 Sales t-1+ εt. Your answer: B was incorrect. The correct answer was A) (Salest - Sales t-1)= b0 + b1 (Sales t-1 - Sales t-2) + b2 (Sales t-4 - Sales t-5) + εt. Why is it A? It’s not a quarterly lag, since there is a Sales t-5 variable there.
It could be a monthly lagged model.
Couldn’t you argue that B could be a bi-annually lagged model?
hahaha i felt the same way when I hit this problem… I was wondering if anyone would point it out. I was like “couldn’t you argue B is a lagged model as well?” i wonder if someone else could enlighten this.
The question asked for an adjusted model, adjustments usually entail using a lagged term of some period to correct an observed effect, as seasonal in this case. B and C are simple lagged models. A adjusts t-1 and and 1-4 lags.