Consider monthly sales and advertising data for an automotive parts company (data set advert ). a. Plot the data using autoplot . Why is it useful to set facets=TRUE ? b. Fit a standard regression...

Consider monthly sales and advertising data for an automotive parts company (data set advert ).

a. Plot the data using autoplot . Why is it useful to set facets=TRUE ?

b. Fit a standard regression model y_t
= a + bx_t
+ η_t
where y_t
denotes sales and x_t
denotes advertising using the tslm() function.

c. Show that the residuals have signicant autocorrelation.

d. What dierence does it make you use the Arima function instead:

e. Ret the model using auto.arima() . How much dierence does the error model make to the estimated parameters? What ARIMA model for the errors is selected?

f. Check the residuals of the tted model.

g. Assuming the advertising budget for the next six months is exactly 10 units per month, produce and plot sales forecasts with prediction intervals for the next six months.