. In Exercise 13.40, you were asked to fit an AR(1) model to the trading volume time series. Because it is a regression fit, it is important to check the adequacy of the fit.

(a) Obtain the residuals from the AR(1) fit and make a time series plot of the residuals. Do the residuals appear random? Compare this time series plot with the time series plot of the original observations made in part (a) of Exercise 13.40.

(b) Make a lagged residual plot. Compare this plot with the lagged plot made in part (b) of Exercise 13.40. Does it appear that the

autocorrelation has been accounted for?

(c) To check the Normality assumption of the regression deviations _t , make a histogram and Normal quantile plot of the residuals. Are the residuals compatible with the Normal distribution? If not, describe the nature of the distribution.


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