# Question: Inventory The following regression model forecasts inventory levels at Wal Mart

Inventory The following regression model forecasts inventory levels at Wal-Mart (in millions of dollars). The predictors are two lags of the aggregate consumer credit debt in the United States (in billions of dollars). Both data series are quarterly from 1993 through 2011 1n = 1282. The equation of the multiple regression is assumed to be

Estimated Inventory t = b0 + b1 Debt t -1 + b2 Debt t -2

(a) Find the least squares estimates and summarize the estimated equation. What is the interpretation of the estimated intercept and slopes?

(b) The regression uses two lags of Debt. Would adding a third or fourth lag improve the ft of this model?

(c) For forecasting, why it is important that the model does not use Debt t as a predictor?

(d) Use color codes or different plotting symbols to distinguish the quarter 11, 2, 3, or 42 in the timeplot of the residuals. Do the residuals from the estimated equation differ from quarter to

quarter? That is, can you distinguish the residuals from certain quarters?

Estimated Inventory t = b0 + b1 Debt t -1 + b2 Debt t -2

(a) Find the least squares estimates and summarize the estimated equation. What is the interpretation of the estimated intercept and slopes?

(b) The regression uses two lags of Debt. Would adding a third or fourth lag improve the ft of this model?

(c) For forecasting, why it is important that the model does not use Debt t as a predictor?

(d) Use color codes or different plotting symbols to distinguish the quarter 11, 2, 3, or 42 in the timeplot of the residuals. Do the residuals from the estimated equation differ from quarter to

quarter? That is, can you distinguish the residuals from certain quarters?

**View Solution:**## Answer to relevant Questions

1. A column in a data table holds the values associated with an observation. 2. A Likert scale represents numerical data. 3. Recoding adds further columns to a data table. 4. Aggregation adds further rows to a data table. 5. ...A video game was previewed to a group of 30 teenagers. The teens were asked to rate the quality of the graphics and indicate if the game was too violent. (a) Identity whether the data are cross sectional or a time ...To reduce energy consumption, many governments around the world have considered legislation to phase out incandescent light bulbs. The goal is to move toward compact fluorescent bulbs and other more efficient sources of ...This table summarizes the number of cases (a case has 24 bottles or cans) of different types of soft drinks sold in the United States in 2004. (From Beverage Digest, March 4, 2005.) (a) Describe your impression of the ...Gross Profit The gross profit of a business is the difference between what a retailer charges for what it sells (net sales) and the cost of the items sold. For example, in the first quarter of 2010, net sales at Lowe’s ...Post your question