Question

The quarterly sales of a manufacturer of spare parts for automobiles are tabulated below. The manufacturer has developed some time series models, which capture a linear trend and seasonal variations with three indicator variables (D1, D2, and D3). Regression outputs related to the above data set are also shown below:

1. Based on the P-values of the indicator variables in Models 1, 2, and 3, determine the ranking of the premiums of the four quarters. Use the significance level of 5%. The premium is an amount of extra sales given to each quarter beyond the average trend determined by the time period.

Answer 1

Based on the p-values of the indicator variables in Models 1, 2, and 3, we can determine the ranking of the premiums of the four quarters.

Step-by-step explanation:

Based on the p-values of the indicator variables in Models 1, 2, and 3, we can determine the ranking of the premiums of the four quarters. The p-values tell us the significance of each indicator variable in relation to the sales. A lower p-value indicates a higher significance.

Let's assume the p-values of the indicator variables are as follows:

D1: 0.03

D2: 0.05

D3: 0.12

Based on these p-values, we can rank the premiums as follows:

D1 (p-value of 0.03) has the highest significance and therefore the highest premium.

D2 (p-value of 0.05) has the second-highest significance and therefore the second-highest premium.

D3 (p-value of 0.12) has the lowest significance and therefore the lowest premium.