Alexis Popov, CFA, wants to estimate how sales have grown from one quarter to the next on average. The most direct way for Popov to estimate this would be: A) an MA(1) model. B) an AR(1) model. C) a linear trend model. D) an AR(1) model with a seasonal lag.
100% C. I had tripped on this one initially. But not again now!
someone care to explain?!!
I thought it was B) How is it C?
It’s C. I sincerely hope I get this all right, but here’s why: A is wrong because you are not tracking a moving average. B is wrong because you are not regressing the independent variable against itself. D is wrong because the question is specified as ‘one quarter to the next’ and not one quarter to the following year’s quarter.
Zim says: Sales growth = trend