Summary 179a. Using the years 1975 to 2006 (and denoting the time variable by the
integers 1 to 32 for simplicity), estimate the linear time trend of
housing prices. Use the same data to estimate an exponential trend.
How well does either trend fit the data?
b. Now estimate two separate linear regressions—one for years 1975 to
1996 and one for 1996 to 2006. Does dividing the time series in this
way make sense? How much predictive confidence would you put in
the time-series regression estimated for 1996 to 2006?Suggested References
Recommended articles on data collection and market experimentation include:
DeJong, D. V., and R. Forsythe. “A Perspective on the Use of Laboratory Market Experimentation
in Auditing Research.” Accounting Review 67 (January 1992): 157–170.
Harrison, G., and J. A. List. “Field Experiments,” Journal of Economic Literature42 (December 2004):
1013–1059.
The following are valuable references on demand estimation and forecasting.
Pindyck, R. S., and D. L. Rubinfeld. Econometric Models and Economic Forecasts.Chapters 1–6. New
York: McGraw-Hill, 1997.
Stock, J. H., and M. Watson, Introduction to Econometrics. 3rd ed. Boston: Addison-Wesley, 2010.
Winston, W. L. Microsoft Excel 2010: Data Analysis and Business Modeling. Microsoft Press, 2011.
Here is a wonderful article on the application (and misapplication) of regression techniques.
Barnett, A., and H. Tress. “Rain Men.” Interfaces (March–April 1990): 42–47.
The following are fine references on forecasting.
Armstrong, J. S. (Ed.).Principles of Forecasting.Boston: Kluwer Academic Publishers, 2002.
Granger, C. W. J. and P. Newbold. Forecasting in Business and Economics.New York: Academic Press,
1989.
The following references discuss macroeconomic forecasting, the business cycle, and forecast accuracy.
McNees, S. K. “An Assessment of the ‘Official’ Economic Forecasts.” New England Economic Review
(July–August 1995): 13–23.
Stock, J. H., and M. Watson (Eds.). Business Cycles, Indicators, and Forecasting. Chicago: University of
Chicago Press, 1993.
Zarnowitz, V. “Theory and History Behind Business Cycles: Are the 1990s the Onset of a Golden
Age?” Journal of Economic Perspectives13 (Spring 1999): 69–90.
Forecasting Web sites include: The Conference Board http://www.conference-board.org/, and
http://www.oecd.org (statistics and forecasts for the major countries of the world), and Professor Ray Fair
of Yale University http://fairmodel.econ.yale.edu/,CHECK STATION
ANSWERS- Both surveys and test marketing would appear to be feasible methods for
acquiring the requisite information. Since the target population
(business travelers) is specific and easy to identify, surveying should be
relatively accurate and inexpensive. For instance, we could distribute a
questionnaire to passengers on flights known to be dominated by
business travelers or send it to the airline’s frequent fliers. In addition,
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