The following timeplot charts the value (in millions of dollars) of inventories held by Dell, Incorporated (the computer maker). This time series is quarterly. The scatterplot on the next page graphs the value of inventories on its lag.
(a) Two outliers are evident in the timeplot (high-lighted with ×€™s). These occur for the quarters ending January 31, 2003 and January 31, 2004. Why might inventories have been so high at the end of these quarters?

(b) Why do two outliers in the timeplot produce the four outliers seen in the scatterplot of Yt on Yt -1?
(c) What is the effect of the outliers on the estimated dependence of inventory levels: Do the outliers create the impression of more or less dependence?
(d) How do you recommend treating these outliers when forecasting future levels of inventory at Dell?

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$800 $700 $6001. 5 $500 $400 $300 $200 $100 - 1990 2005 1995 2000 Year 800 700 600 Δ500 400 300 200 1001. 0 0 10O 200 300 400 500 600 700 800 Lag Inventories