Question 1 (1 point) True or False: A disadvantage of using regression for trend

Question

Question 1 (1 point)

True or False: A disadvantage of using regression for trend analysis is that it can only be used for time series with linear trends.

Question 2 (1 point)

In a simple regression to estimate a linear trend, the dependent variable is the value of the time series and the independent variable is

Question 2 options:

Time or some time index.

The time series lagged by 1 period.

A binary (dummy) variable equal to 1 for observations in January, and 0 for other months.

The natural log of time.

Question 3 (1 point)

True or False: When using regression to estimate a trend model one should rely solely on the statistical significance of the estimated coefficient on the trend variable in deciding whether a trend exists.

Question 4 (1 point)

When applying a non-linear trend, it is important not to choose an overly complex shape because

Question 4 options:

Seasonality will dominate the resulting forecasts

It will likely only fit the training period well and be overfitting the data

The loss of degrees of freedom reduces the statistical significance of the model

Multicollinearity will be a problem with such a model

Time or some time index.

The time series lagged by 1 period.

A binary (dummy) variable equal to 1 for observations in January, and 0 for other months.

The natural log of time.

Explanation / Answer

First question is answered below

Correct answer: TRUE

Reason: Regression in time series only assumes linear relationship between variables and uses this relationship to forecast future trends. This is a major disadvantage to trend analysis as all other types of relationships are ignored and only linear is assumed.

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