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Dianne Hart, CFA, is considering the purchase of an equity position in Book World, Inc, a leading seller of books in the United States. Hart has obtained monthly sales data for the past seven years, and has plotted the data points on a graph. Which of the following statements regarding Hart’s analysis of the data time series of Book World’s sales is most accurate? Hart should utilize a: A. mean-reverting model to analyze the data because the time series pattern is covariance stationary. B. log-linear model to analyze the data because it is likely to exhibit a compound growth trend. C. linear model to analyze the data because the mean appears to be constant. |