Chapter 16, Problem 62PS

The data stored in McDonalds represent the gross revenues (in billions of current dollars) McDonald’s Corporation from 1975 through 2016:

a. Plot the data.

b. Compute the linear trend forecasting equation.

c. Compute the quadratic trend forecasting equation.

d. Compute the exponential trend forecasting equation.

e. Determine the best-fitting autoregressive model, using $\alpha =\mathrm{0.05.}$

f. Perform a residual analysis for each of the models in (b) through (e).

g. Compute the standard error of the estimate $(S_{\text{YX}})$ and the MAD for each corresponding model in (f).

h. On the basis of your results in (f) and (g), along with a consideration of the principle of parsimony, which model would you select for purpose of forecasting? Discuss.

i. Using the selected model in (h), forecast gross revenues for 2017.