Dividends, paid by corporations from their profits to their shareholders, have fluctuated over time as a percentage of profits and this percentage has risen to some extent over the years. Table 14.4.11 shows the computer results of a Box€“Jenkins analysis of dividends as a percentage of corporate profits, annually from 1990 to 2008, while Figure 14.4.2 shows the data series with the Box€“Jenkins forecasts.21
a. What kind of component (autoregressive or moving average) does the estimated model include?
b. How many differences are used in the model?
c. Is the model component that you identified in part a significant?
d. Is the constant term significant?
e. Based on the figure, would you be surprised if dividends dropped to 30% of profits in 2015?
f. Based on the figure, would you be surprised if dividends rose to 65% of profits in 2015?

FIGURE 14.4.2

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TABLE 14.4.11 Results of Box-Jenkins Analysis of Dividends as a Percentage of Profits Final Estimates of Parameters Type Estimate StDev Ratio p-Value ART Constant 0.009964 0.009142 1.09 0.292 Differencing: 1 regular difference Number of observations: Original series 19, after -0.0197 0.2869 0.07 0.946 differencing 18 Residuals: SS 0.0236910 (backforecasts excluded) MS 0.0014807 DF 16 100% 90% 老 80% 70% 60% o 50% 40% 30% 20% 10% 0% t 1990 1995 2000 2005 2010 2015 2020 Year