Advertising agency. The managing partner of an advertising agency is interested in the possibility of making accurate predictions of monthly billings. Monthly data on amount of billings (Y. in thousands of constant dollars) and on number of hours of staff time (X, in thousand hours) for the 20 most recent months follow. A simple linear regression model is believed to be appropriate. but positively autocorrelated error terms may be present.
a. Fit a simple linear regression model by ordinary least squares and obtain the residuals. Also obtain s{bo} and s{bi}.
b. Plot the residuals against time and explain whether you find any evidence of positive autocorrelation.
c. Conduct a formal test for positive autocorrelation using α = .01. State the alterative, decision rule. and conclusion. b the residual analysis in part (b) in accord with the test result?
