The home retail industry experienced relatively consistent annual growth until the economic crisis of 2006. Here is a scatterplot of the Net Sales ($B) of The Home Depot from 1995 through 2004, along with a regression and a time series plot of the residuals.
a) What does the R2 value in the regression mean?
b) What features of the residuals should be noted with regards to this regression?
c) What features of the residuals might be dealt with by a re-expression? Which ones would not be helped by a re-expression?
d) Can you use the regression model to help in your understanding of the growth of this market?
