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Question: A research analyst at an investment firm

A research analyst at an investment firm is attempting to forecast the daily stock price of Home Depot, using causal models. The following table shows a portion of the daily adjusted closing prices of Home Depot y and the Dow Jones Industrial Average x from August 14, 2009, to August 31, 2009.
A research analyst at an investment firm is attempting to forecast the daily stock price of Home Depot, using causal models. The following table shows a portion of the daily adjusted closing prices of Home Depot y and the Dow Jones Industrial Average x from August 14, 2009, to August 31, 2009.


Estimate three models: (a) yt = β0 + β1xt−1 + εt, (b) yt = β0 + β1yt−1 + εt, and (c) yt = β0 + β1xt −1 + β2yt−1 + εt. Use the most suitable model to forecast Home Depot’s daily stock price for September 1, 2009.

Estimate three models: (a) yt = β0 + β1xt−1 + εt, (b) yt = β0 + β1yt−1 + εt, and (c) yt = β0 + β1xt −1 + β2yt−1 + εt. Use the most suitable model to forecast Home Depot’s daily stock price for September 1, 2009.





Transcribed Image Text:

y August 14 26.92 9321.40 August 17 25.89 9135.34 August 31 27.07 9496.28


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