Question

select the correct answer
a financial analyst constructs a statistical model to represent the market shares of several similar companies. she then collects data over the next
month to evaluate her model. at the end of the month, she finds that for one of the companies, the difference between her model and the data is 5%
she decides to collect data for an additional two months. if her model is valid, what could she expect from the total data collected after three months?
o a. it is impossible to predict how the difference between the data and the model will change
o b. the difference between the data and the model will get larger.
o c. the difference between the data and the model will stay the same
o d. the difference between the data and the model will get smaller.

Explanation:

In statistical modeling, while a model may be valid, real - world data is subject to various random factors (such as market fluctuations, unforeseen events, etc.). Just because the model was valid for one month, we cannot assume a definite pattern (increase, decrease, or no change) in the difference between the model and the data for the next two months. There are too many variables at play in the market (e.g., competitor actions, economic trends, consumer behavior changes) that can affect the market share data in unpredictable ways.

Answer:

A. It is impossible to predict how the difference between the data and the model will change