Assignment 3: Forecasting Question 5 - 33
Assignment 3: Forecasting Question 5 - 33
Assignment 3: Forecasting Question 5 - 33
Question 5 33
A major source of revenue in Texas is a state sales tax on certain types of
goods and services. Data are compiled and the state comptroller uses
them to project future revenues for the state budget. One particular
category of goods is classified as Retail Trade. Four years of quarterly data
for one particular area of southeast Texas follows:
Quarter
1
2
3
4
Year 1
218
247
243
292
Year 2
225
254
255
299
Year 3
234
265
264
327
Year 4
250
283
289
356
Data
MA
CMA
Percenta Seasonal
ge
ratio
218
247
243
250
96.86
0.97
292
251.75
115.59
1.16
225
253.5
88.24
0.88
254
256.5
98.69
0.99
255
258.25
98.31
0.98
299
260.5
114.18
1.14
234
263.25
88.51
0.89
265
265.5
98.51
0.99
264
272.5
96.17
0.96
327
276.5
117.31
1.17
250
281
87.99
0.88
283
287.25
250.8
8
252.6
3
255.0
0
257.3
8
259.3
8
261.8
8
264.3
8
269.0
0
274.5
0
278.7
5
284.1
3
290.8
8
97.29
0.97
3
4
289
356
294.5
At the first, we must compute a series of moving averages (MA) and then
average the MA in order to build the seasonal indices based on a CMA. In
addition, the percentage column is simply the data column, divided by the
CMA, and multiplied by 100. Using QM for Windows, we specify Centered
Moving Average and we get:
Index
Index
Index
Index
for
for
for
for
quarter
quarter
quarter
quarter
1,
2,
3,
4,
I1 = (0.88+0.88+0.88)/3 = 0.88
I2 = (0.99+0.98+0.97)/3 = 0.98
I3 = (0.96+0.98+0.96)/3 = 0.97
I4 = (1.16+1.14+1.17)/3 = 1.16
Dat
a
21
8
24
7
24
3
29
2
22
5
25
4
25
5
29
9
23
4
26
5
26
4
Season
al ratio
0.88
Deseasona
lize
247.73
0.98
252.04
0.97
250.88
1.16
252.63
0.88
255.00
0.99
257.38
0.98
259.38
1.14
261.88
0.89
264.38
0.99
269.00
0.96
274.50
32
7
25
0
28
3
28
9
35
6
1
2
3
4
1.17
278.75
0.88
284.13
0.97
290.88
0.97
297.94
1.16
306.90
X
1
2
3
4
5
6
7
8
9
10
11
12
13
290.
88
297.
94
306.
90
14
15
16
So, we have to find the coefficients 'a' and 'b' in the following
regression:
Y = a + bX
Using excel, we get the intercept and slope. We get that these values
are:
a = 237.8226
b = 3.663168
So, the trend line is Y = 237.82 + 3.66X
c) Use the trend line to forecast the sales for each quarter of year 5.
This forecast can be obtained by simply using as "explanatory
variables" the values 17, 18, 19 and 20, which would correspond to
each quarter of the fifth yeard (recall that the 4th quarter of the 4th
year would be the 16th value).
17
18
19
20
Quarter
Quarter
Quarter
Quarter
1:
2:
3:
4:
Y
Y
Y
Y
=
=
=
=
237.82
237.82
237.82
237.82
+
+
+
+
3.66(17)
3.66(18)
3.66(19)
3.66(20)
=
=
=
=
300.04
303.7
307.36
311.02
d) Use the seasonal indices to adjust the forecasts found in part (c) to
obtain the final forecasts.
Since the trend forecasts were done using deseasonalized data, we
must now adjust each forecast to see the actual value for each quarter.
This is simply a matter of undoing what we did in question a. We must
take each value and multiply it by (seasonal index)/100. We then get:
17
18
19
20
Quarter
Quarter
Quarter
Quarter
1:
2:
3:
4:
300.04(0.88) = 264.0352
303.7(0.98) = 297.626
307.36(0.97) = 298.1392
311.02(1.16) = 360.7832
Question 5 34
Y
x
x
T
(time
SUMMARY OUTPUT
perio
Sales d)
Q1
Regression
Statistics
218
1
Multiple
R
0.984243
247
2
958
243
3
R Square
0.968736
292
4 169
Adjusted R
0.957367
225
5 504
Square
Standard
7.670708
254
6
Error
75
255
7
Observatio
16
8
ns299
234
9
ANOVA
265
10
264
11 df
327
12
Regression
4
250
13
Residual
11
283
14
289
15
Total
15
356
16
Coefficien
ts
Q2
Q3
1
0
0
0
1
0
0
0
1
0
0 SS
0
20055.2
1
0647.237
5
020702.4
4
0
3.69375
Standar
d Error
5.75303
2
0.42880
6
Q1
-75.66875
5.57447
4
Q2
-48.8625
5.49139
2
Q3
-52.05625
5.44093
4
Intercept
t
281.5625
0
1
0
0
0
1
0
0
0
1
0 MS
0
5013.8
0
158.839
77
0
0
0
0
1
0
0
0
1
0
0
0
1 F
0
85.211
0 07
0
1
0
t Stat
48.941
59
8.6140
42
13.574
2
8.8980
2
9.5675
2
P-value
3.18E14
3.21E06
Significa
nce F
3.34E-08
Lower
95%
268.9002
2.749955
3.25E08
-87.9381
2.34E06
-60.949
1.15E06
-64.0317
Upper
95%
294.22
48
4.6375
45
63.399
4
Lower
95.0%
268.90
02
2.7499
55
87.938
1
Upper
95.0%
294.22
48
4.6375
45
63.399
4
36.776
40.080
8
60.949
64.031
7
36.776
40.080
8
Question 5 - 35
x
y
Quarte
r
Data
1
274
172
130
162
282
178
136
168
282
10
182
11
134
12
170
13
296
14
210
15
158
16
182
Interc
ept
Slope
197.6
-0.34
Trend
Line
197.2
6
196.9
3
196.5
9
196.2
6
195.9
2
195.5
9
195.2
5
194.9
2
194.5
8
194.2
5
193.9
1
193.5
8
193.2
4
192.9
1
192.5
7
192.2
4
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.028
R Square
0.001
Adjusted
R Square
-0.071
Standard
Error
58.65
Observati
ons
16
ANOVA
Df
Residual
14
SS
38.223
53
48160.
78
Total
15
48199
Coefficients
197.6
Standa
rd
Error
30.757
36
-0.335294
3.1808
51
Regressio
n
Intercept
X Variable
1
MS
38.223
53
3440.0
55
t Stat
6.4244
78
0.1054
1
F
0.0111
11
Significa
nce F
0.917546
Pvalue
1.59E05
Lower
95%
131.632
Upper
95%
263.56
8
0.9175
46
-7.15754
6.4869
52
Lower
95.0
%
131.6
32
7.157
54
Upper
95.0%
263.56
8
6.4869
52
Percenta Seasona
1
2
Data MA
CMA ges
1
274
2
172
184.5
185.
130
50
Deseasonali
l Ratio
zed
1.47
186.6021
0.96
178.8708
70.08
0.70
185.5
186.5
187.
162
0
188.0
25
188.
86.52
0.87
187.25
282
0
189.5
75
190.
149.40
1.49
188.75
178
0
191.0
25
191.
93.56
0.94
190.25
136
0
191.0
00
191.
71.20
0.71
191
168
0
192.0
50
191.
87.73
0.88
191.5
282
0
191.5
75
191.
147.07
1.47
191.75
10
182
0
192.0
75
193.
94.92
0.95
191.75
11
134
0
195.5
75
199.
69.16
0.69
193.75
12
170
0
202.5
00
205.
85.43
0.85
199
13
296
0
208.5
50
210.
144.04
1.44
205.5
14
210
0
211.5
00
100.00
1.00
210
15
158
0
183.3
0.70
225.2356
16
182
0.87
210.2661
Interce
pt
Slope
176.90
2.18
c) The negative slope that we get in part (a) was found when the
seasonality was ignored. The quarter 1 has a high seasonal ratio, so
the first observation was very large relative to the last observation.
According raw data, which was used for the trend line in a part (a), it
appeared that there was a negative trend line but in reality this was
due to the seasonal variation and not due to trend. In addition, the
decomposition method is better to use when there is a sesonal pattern
present.
Question 5 39
Trend
Year
MAP
DJIA
SR
Error
MAD MSE
5769.2 2015.2 2015.
E
53.68
1994
3754
14
1
6166.5 2332.5
21
2332.
4061089
18
60.83
1995
3834
81
8
6563.9 1446.9
58
1446.
5440935
94
28.27
1996
5117
48
6961.3
95
513.3
2093659
73
7.960
1997
6448
15 513.32
7358.6
-
2
549.3
263492
8
6.946
1998
7908
82 549.32
-
301750
7756.0 1456.9
1456.
1999
9213
1150
2000
49
15.81
5
-
95
2122707
41
8153.4 3348.5
3348.
1121301
29.11
58
31
16
1079
2001
8550.7 2240.2
83
2240.
20.76
2
-
22
5018574
01
1002
8948.1 1073.8
1073.
5
5
9345.5 1003.5
85
1003.
1153155
49
12.02
10.71
2002
2003
10
8342
1045
17
9742.8
2
-
52
710.1
1007045
97
6.793
2004
11
3
1078
83 710.12
10140.
-
2
643.7
504266
4
5.969
2005
12
4
1071
25 643.75
10537.
-
5
180.3
414414
5
1.683
2006
13
62 180.38
-
32538
1246
10934. 1525.0
1525.
2007
14
98
2
-
02
1326
11332. 1929.6
1929.
12.23
2325673
93
14.55
2008
15
35
5
11729. 2957.7
65
2957.
3723545
02
33.71
2009
16
8772
1043
72
2
12127. 1696.0
72
1696.
8748096
77
16.26
2010
17
1
1157
08
12524.
08
947.4
2876704
00
8.183
2011
18
7
1239
45 947.45
12921.
5
529.8
897665
9
4.275
2012
19
2
1310
82 529.82
13319.
2
215.1
280708
5
1.642
2013
20
19 215.19
5.46E
9
1365
46305
262626
1
17.5
-13
.78
726
Interc
ept
Slope
5371.
85
397.3
7
0.8
0.2
SE
MSE
1693.325303
2867351
Yea
r
DJIA
199
FIT
Error
MSE
4
199
3754
3754
3754
5
199
3834
3754
3754
80
6400
6
199
5117
3818
13
3831
1286
1654310
7
199
6448
4859.76
219
5078
1370
1875936
8
199
7908
6174.07
438
6612
1296
1680119
9
200
9213
1150
7648.761
645
8294
919
844767
0
200
2
1079
9029.178
792
9821
1681
2824543
1
200
1
1002
11165.87
1061
12227
-1436
2061979
2
200
11078.19
831
11910
-1888
3562751
3
200
8342
1045
10399.51
529
10929
-2587
6691711
4
200
3
1078
8859.367
10157.36
115
352
8975
10509
1478
275
2185068
75456
5
200
4
1071
6
200
8
1246
10729.06
396
11125
-407
165616
7
200
0
1326
10799.39
331
11130
1330
1768431
8
200
12194.04
544
12738
524
275004
9
201
8772
1043
13157.12
627
13785
-5013
25125958
0
201
1
1157
9774.516
-175
9600
831
690619
1
201
7
1239
10264.79
-42
10223
1354
1832754
2
201
2
1310
11306.24
175
11481
911
829442
12209.85
321
12531
573
328797
Using Excel, the MSE is 2,867,351. As we can see, this MSE is higher than
the MSE that we found using a trend line. So, the trend line provides
better forecasts than exponential smoothing. But, other values for the
two smoothing constants might result in better forecasts and a lower MSE.
Question 5 41 (a)
Exponential
Smoothing
0.4
SE
MSE
Yea
r
DJIA
199
FIT
Error
MSE
4
199
3754
3754
3754
5
199
3834
3754
3754
80
6400
6
199
5117
3786
3786
1331
1771561
7
199
6448
4318.4
4318
2130
4535196
8
199
7908
5170.24
6265.34
5170
2738
7495330
9213
6265
2948
8688676
1942.656717
3773915
200
1150
7444.40
1646406
0
200
2
1079
6
9067.44
7444
4058
1
200
1
1002
4
9756.86
9067
1724
2970646
2
200
9757
265
70296
3
200
8342
1045
9862.92
9254.55
9863
-1521
2313197
4
200
3
1078
2
9733.93
9255
1198
1436278
5
200
4
1071
1
10153.9
9734
1050
1102645
6
200
8
1246
6
10379.5
10154
564
318143
7
200
0
1326
8
11211.7
10380
2080
4328167
8
200
5
12031.8
11212
2050
4203545
1062660
9
201
8772
1043
5
10727.9
12032
-3260
0
201
1
1157
1
10609.1
10728
-297
88155
1
201
7
1239
4
10996.2
10609
968
936743
2
201
2
1310
9
11554.5
10996
1396
1948015
3
201
4
1310
7
12174.3
11555
1549
2400727
12174
(b)
Exponential
0.99045
Smoothing
88
SE
MSE
Yea
r
DJIA
199
FIT
Error
MSE
4
199
3754
3754
3754
5
199
3834
3754
3833.23
3754
80
6400
6
199
5117
7
5104.75
3833
1284
1648048
7
199
6448
1
6435.18
5105
1343
1804317
8
199
7908
4
7893.94
6435
1473
2169187
9
200
9213
1150
8
9200.41
7894
1319
1739899
0
200
2
1079
5
11480.0
9200
2302
5297295
1
200
1
1002
4
10797.5
11480
-689
474776
2
200
10798
-776
601515
3
200
8342
1045
10029.4
10029
-1687
2847318
4
200
3
1078
8358.1
10433.0
8358
2095
4388607
5
200
4
1071
1
10780.6
10433
351
123192
6
200
8
1246
10781
-63
3925
7
200
0
1326
10718.6
12443.3
10719
1741
3032482
8
200
8
13254.1
12443
819
670131
2009002
9
201
8772
1043
9
8814.76
0
0
13254
8815
-4482
1616
2
2612215
1623.168907
2634677
0
201
1
1157
5
10415.5
1
201
7
1239
8
11565.9
10416
1161
1348898
2
201
2
1310
2
12384.1
11566
826
682410
3
201
4
1310
2
13097.1
12384
720
518230
13097
Using Excel, the best smoothing constant is 0.99. According this results
the lowest MSE of 2,632,477