Another easy way to assess trend or seasonality fits are to plot the residuals, the detrended or deseasonalized data. Consider annual returns with net income reported by the California Franchise Tax Board from 1950 to 2015 (file “Ca_Income_Loss_Tax_Assessed”; variable Returns/w Net Income.).
a) Fit an exponential trend model, and record the model residuals.
b) Fit a quadratic trend model, and record the model residuals.
c) Construct line charts of the residuals in part (a), (b) to visually determine which model appear to have the least systematic error (which has the most nonrandom pattern).