Correct answer for dummy coding in ARIMAX model

[Daniel121181]

I would like to check the correct answer for a practice exam question for text analytics. The said question is: The provided answer is given as (D) but I am unsure of this. It looks to me like the correct answer should be (A) since the dummy values of 0 correspond to the period after March 04. I would be most grateful for some help / clarification. Thank you very much! 

Daniel

[sbxkoenk · Accepted solution]

Hello,

dummy_1 is for a temporary level shift (step-up + step-down).

dummy_2 is for a permanent level shift (step Intervention).

dummy_3 is for an additive outlier at one point in time (point intervention).

dummy_4 is for a ramp (level steadily going up and then falling back immediately to its original level). Here it concerns a temporary ramp intervention. After ramp, level is back on pre-event level.

Hence, dummy_4 is the one you need!

The time series data are easy to simulate and then you can easily check the effect of all 4 dummies (one by one) in the Time Series Forecasting System of SAS/ETS.

Is this really a practice exam question for <<text analytics>>??

Cheers,

Koen

[Daniel121181]

Thank you very much for your prompt reply Koen. This is very helpful. I guess I was confused by the use of dummy coding values other than 0 or 1 which I am not used to seeing. 

Yes, the question is from the practice exam for "Text Analytics, Time Series, Experimentation, and Optimization" (apologies I didn't give the full name). 

Thanks once again!

Daniel