Essay
Exhibit 18.7.The following table shows the annual revenues (in millions of dollars)of a pharmaceutical company over the period 1990-2011. The autoregressive models of order 1 and 2,
and
,were applied on the time series to make revenue forecasts.The relevant parts of Excel regression outputs are given below.
Model AR(1): Model AR(2):
Refer to Exhibit 18.7.(Use Regression in Data Analysis of Excel. )Compare the autoregressive models,
and
,through the use of MSE and MAD.Hint.You may compute the errors by clicking "Residuals";to analyze
instead of
,it suffices to click "Constant is Zero".
Correct Answer:

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