Figure 6 shows the quarterly sales of Cisco Systems from

Figure 6 shows the quarterly sales of Cisco Systems from 1Q:1991 to 4Q:2000.
FIGURE 6 Quarterly Sales at Cisco

Table 6 gives the regression statistics from estimating the model Δln (Sales t) = b0 + b1Δln (Salest ˆ’1) + ε t.

TABLE 6 Change in the Natural Log of Sales for Cisco Systems Quarterly Observations,

3Q:1991-4Q:2000

Regression Statistics

R-squared…………………………0.2899

Standard error……………………..0.0408

Observations……………………………38

Durbin-Watson……………………1.5707

A. Describe the salient features of the quarterly sales series.

B. Describe the procedures we should use to determine whether the AR(1) specification is correct.

C. Assuming the model is correctly specified, what is the long-run change in the log of sales toward which the series will tend to converge?

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