Quarterly sales for a department store over a six-year period are given in Table (file Sales.xls). 1 answer below »

Quarterly sales for a department store over a six-year period are given in Table (file Sales.xls).

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Sales

Year

Quarter

(millions)

1984

1

$50,147

1984

2

$49,325

1984

3

$57,048

1984

4

$76,781

1985

1

$48,617

1985

2

$50,898

1985

3

$58,517

1985

4

$77,691

1986

1

$50,862

1986

2

$53,028

1986

3

$58,849

1986

4

$79,660

1987

1

$51,640

1987

2

$54,119

1987

3

$65,681

1987

4

$85,175

1988

1

$56,405

1988

2

$60,031

1988

3

$71,486

1988

4

$92,183

1989

1

$60,800

1989

2

$64,900

1989

3

$76,997

1989

4

$103,337

 a Use multiple regression to develop a model that can be used to predict future quarterly sales. (Hint: Use dummy variables and an independent variable for the number of the quarter (quarter 1, quarter 2, . . . , quarter 24).

b Letting Yt = sales during quarter number t, discuss how to fit the following model to the data in Table :

 width= 

where x2 = 1 if t is a first quarter, x3 = 1 if t is a second quarter, and x4 = 1 if t is a fourth quarter. (Hint: Take logarithms of both sides.)

c Interpret the answer to part (b).

d Which model appears to yield better predictions for sales?

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