Exam 17: Understanding Residuals

Quarterly sales figures for e-commerce retail sales were obtained from the first quarter of 2001 through the fourth quarter of 2007. A regression model was estimated to describe the trend in e-commerce retail sales over time. a. Based on the plot of residuals versus predicted values, is the linear model appropriate? Explain. b. The Durbin-Watson statistic for this regression was found to be 1.727. What can you conclude from this statistic?

Re-express data to make them appropriate for use with a linear model -Data on labor productivity and unit labor costs were obtained for the retail industry From 1987 through 2006 (Bureau of Labor Statistics). A regression was estimated to Describe the linear relationship between the two variables. Below is the plot of residuals Versus predicted values. Which of the following re-expression of the data would be Appropriate?