Using the data from the first problem in Section 11.1 for Duddly Dufus Enterprises, estimate an autoregressive model. Experiment with different values for p-order models until you have what you think is the most justifiable model. Explain your final model. Compare it with the time series model you estimated in Section 11.1.

First problem in Section 11.1

As sales decline at Duddly Dufus Enterprises, inventories tend to reach an abnormally high level. The accompanying monthly data in hundreds of dollars record these trends. Develop and interpret the simple time series model for each variable shown here. What is your forecast for April of the next year for each variable? You can perform the calculations by hand, since each model is a simple regression model, or transfer the data to a computer file.

Month January 1 February 1 March 1 April 1 May 1 Sales (500) 6.3 6.4 6.2 5.6 5.5 Inventories (S) 2.1 2.6 3.1 3.5 3.4