In one of the questions in Quant Vignette - 86507, Where it gives R square using both linear and log linear for Very Vegan. The regression equation is for sales. One of the questions in the vignette was Based upon the output, which equation explains the cause for variation of very vegan’s sales over the sample period (Sample period sales go from 17 Million in 1Q to 100 Million in last quarter). a) - Cause cannot be determined b) Both simple linear trend and log linear trend have explanatory power c) Simple trend is linear. I went and checked with Rsquare is 0.9 and t-stat is significant and I concluded that both simple and log have explanatory power. But the answer was A. To actually determine the explanatory power of sales itself, fitted values of the log linear trend needs to be determined and compared to the original data. The given information does not allow for comparison. Please help. This is not making sense for me.
sounds like some serious seasonality in which case you need to adjust the formula using an AR model or add a drift
time does not explain. Can you say what causes the sales to increase.
Here is the info provided in the vignette Yolanda seerveld is an analyst studying the growth of sales of a new restaurant chain called ver vegan. The increase in public’s awareness of healthfule eating had a very positive effect. gather quarterly sales data for three years. Over the twelve months, sales grew from $17.2MM in the first quarter to 106.3MM in the last quarter. Very vegan has experienced growth of 500% over the three years. He suspects an exponential growth model more appropriate than linear trend model.