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Fit autoregressive model to GE stock price under different order

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Problem 16.30 GE.xls Autoregression

page 677
page 275

The data in the table represent the January 1 stock price for the 20-year period fro 1987 to 2006
for General Electric, one of the world's largest companies.

Year Coded Year GE Stock Price
1987 0 2.25
1988 1 2.36
1989 2 2.48
1990 3 3.68
1991 4 3.38
1992 5 4.65
1993 6 5.35
1994 7 6.74
1995 8 6.76
1996 9 9.80
1997 10 13.75
1998 11 20.77
1999 12 29.99
2000 13 44.98
2001 14 42.27
2002 15 35.90
2003 16 22.37
2004 17 29.25
2005 18 35.29
2006 19 34.79

a. Fit a third-order autoregressive model to the GE stock price and test for the
significance of the third-order autoregressive parameter. ( Use alpha=0.05).

b. If necessary, fit a second-order autoregressive model to the GE stock price and test for the
significance of the second-order autoregressive parameter. ( Use alpha=0.05).

c. If necessary, fit a first-order autoregressive model to the GE stock price and test for the
significance of the first-order autoregressive parameter. ( Use alpha=0.05).

d. Forecast the GE stock price for years 2007 and 2008 using the most appropriate
autoregressive model among a b and c.

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Solution Summary

The solution gives detailed steps on fitting a autoregressive model to the GE stock price and test for the
significance of the autoregressive parameter under different orders and forecasting the future price.

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