(a) For the Yule (1926) data in Table 15.A.1 (Appendix 15.A), test whether the two data series {(xt, yt), t = 1, 2, . . . , n} can be viewed as typical realizations of a simple Normal model (Table 15.1); test the validity of assumptions [1]–[4] for each of the two data series.

(b) Estimate the LR model Yt = β0 + β1xt + ut, t∈N and apply thorough M-S testing to assess the validity of assumptions [1]–[5] (Table 15.4).

(c) Explain the relationship between the regression coefficient β1 and the correlation coefficient ρ = Corr(Xt, Yt).

(d) Use your answer in

(c) to explain away the significant correlation coefficient derived by Yule (1926) on statistical adequacy grounds.