Simple Time Series Models
This is basic trend modeling.
A simple trend model can be expressed as follows:
Check your understanding of this lesson with a short quiz.
The big validity pit-fall for simple trend models is serial correlation; if this problem is present, then you will see an artificially high R2 and your slope coefficient may falsely appear to be significant.
There is a visual way to detect serial correlation (not shown) or you can perform a Dubin-Watson test.
Log-linear Trend Models
This applies to non-linear time series trends.
The structure is:
Again, like the simple trend model, use a graph or Durbin Watson test to check for serial correlation, as this will be a big threat to validity.
