Monthly closing stock prices for a utility company were obtained from January 20

Question

Monthly closing stock prices for a utility company were obtained from January 2014 through August 2015. A regression model was estimated to describe the trend in closing stock prices over time.
a) Based on the plot of residuals versus predicted values, is the linear model appropriate? Explain.

b) The Durbin-Watson statistic for the collected data was found to be 0.5626. What can you conclude from this statistic at the 0.01 level of significance?

Explanation / Answer

a) No, it is not appropriate. Because the resuuare plot has pattern, which violatate the linear assumption.

B) Here the critical value at 0.01 is 0.85, so tests statistics is less than 0.85, so we were failed to conclude the sihnifusigni

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