Explanation:
If the analyst's experience is correct, then last month's sales, sales from a quarter ago, and sales from a year ago should have the ability to explain the behavior of this month's sales. Those autoregressive lags are represented as 1, 3, and 12 lags respectively.
(Book 2, Module 21.3, LO 21.n)
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Question 45
A retail analyst at Primary Advisors has several years of experience working in various retail outlets while attending business school. His personal experience indicates a high level of seasonality in retail sales, with impacts from one quarter ago and one year ago being noticeable on the current month's sales performance. He recognizes the benefit of looking at the previous month's sales, but he has also decided to analyze a model of the time series behavior of retail sales that incorporates the seasonality he noticed as a student. Which of the following AR models best represents the analyst's seasonality experience?
A
An AR(1,3,12) model.
B
An AR(1,4,12) model.
C
An AR(12) model.
D
An AR(3) model.
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