Consider data on the weekly stock prices of Qualcomm, Inc., a digital wireless telecommunications designer and manufacturer, over the time period of 1995 to 2000. The complete data can be found in Table 5-16 on the textbook's Web site.
a. Create a scatter gram of the closing stock price over time. What kind of pattern is evident in the plot?
b. Estimate a linear model to predict the closing stock price based on time. Does this model seem to fit the data well?
c. Now estimate a squared model by using both time and time-squared. Is this a better fit than in part (b)?
d. Now attempt to fit a cubic or third-degree polynomial to the data as follows:
Yi = B0 + B1Xi + B2X2i + B3X3 + ui
where Y = stock price and X = time. Which model seems to be the best estimator for the stock prices?