Question 13.71

13.71 U.S. poverty rate.

Consider a time series on the annual poverty rate of U.S. residents aged 18 to 64 from 1980 through 2012.39

poverty

  1. Make a time plot. Describe the movement of the data over time.
  2. Obtain the first differences for the series and test them for randomness. What do you conclude?
  3. Would you conclude that the poverty rate series behaves as a random walk? Explain.

13.71

(a) The data are not linear; they are somewhat seasonal through the first 20 observations then deviate afterward. (b) For the first differences of poverty, the Runs Test and the ACF show they are not random. (c) The first differences in a random walk are random; because the first differences for poverty are not random, it is unlikely the poverty series behaves like a random walk.