Q. Savings-Mart sells patio also lawn furniture. Trades are seasonal, with higher trades during the spring also summer quarters also lower trades during fall also winter quarters. The company developed the subsequent quarterly trades forecasting model using data from 2005Q1 to 2009Q4 i.e. n=20 quarters:
t =8.25 + 0.125t - 2.75D1t + 0.25D2t + 3.50D3t R2 = 0.789;
(2.5) (3.1) (1.8) (5.3)
where the numbers in parenthesis are t-values,
t =predicted quarterly trades ($million) in quarter t
t =time period
D1t= dummy inconsistent =1 for 1st quarter, 0 otherwise
D2t= dummy inconsistent =1 for 2nd quarter, 0 otherwise
D3t = dummy inconsistent =1 for 3rd quarter, 0 otherwise
a. Explain illustrate what R2 = 0.789 means.
b. Forecast Savings-Mart's trades for every of the quarters in 2010.
c. Which inconsistents of the model are statistically significant? Utilize t-test for α=.05.