Consider the following table, consisting of 20 observations of the variable y an
ID: 3358527 • Letter: C
Question
Consider the following table, consisting of 20 observations of the variable y and time t. The data are also on the text website, labeled Exercise 18.11.
Estimate a linear trend model and an exponential trend model for the sample. (Round your answers to 4 decimal places.)
Calculate the MSE and MAD for the both trends models. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
By comparing MSE and MAD, which of the above methods perform better?
Consider the following table, consisting of 20 observations of the variable y and time t. The data are also on the text website, labeled Exercise 18.11.
Explanation / Answer
Solution:
Linear Trend:
y = 0.8575x + 0.2751
R² = 0.9302
Exponential Trend:
y = 2.8364e0.0979x
R² = 0.9836
for linear trend:
MAD 1.1028
MSD 1.8358
for exponential trend:
MAD 0.40829
MSD 0.25532
From MAD and MSD it is clear that exponential trend is better than linear trend.