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Fitting of A Modified Exponential Trend Line

This document describes methods to estimate trend values from time series data using either the method of three selected points or the method of partial sums. It includes the theory, calculations and results of applying each method to a sample dataset on annual GDP growth rates from 1995 to 2015.

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104 views4 pages

Fitting of A Modified Exponential Trend Line

This document describes methods to estimate trend values from time series data using either the method of three selected points or the method of partial sums. It includes the theory, calculations and results of applying each method to a sample dataset on annual GDP growth rates from 1995 to 2015.

Uploaded by

pmpqr62kkb
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Practical 3

Theory: If trend is assumed to be of the form, Tt = k + abt

Then trend values can be estimated by

- Method of three selected points


- Method of Partial sums

Three selected points

Choose 3 equidistant points wrt time (t1, t2, t3)


Let the corresponding ordinates be y1, y2, y3 then
1
y - y t2- t1
b = ( 3 2)
y2- y1
t1 2
y - y t2- t1 (y2 - y1)
a = ( 2 1) ×
y3- y2 y3 - 2y2 + y1

y3 y1- y2 2
k=
y3 - 2y2 + y1

The estimated trend values are given by


Tt = k + abt

Partial Sums
Divide the entire data into 3 equal parts and compute the partial sums for each part.

S1 = ∑nt= 1 yt
S2 = ∑2n
t = n+1 yt

S3 = ∑3n
t = 2n+1 yt

1
S3 - S2 n
b =( )
S2 - S1

b - 1 (S2 - S1)3
a= ×
b S3 - 2S2+ S1

S3 S1 - S2 2
k=
n(S3 - 2S2 + S1 )

The trend line estimates are obtained from the fitted trend line
Tt = k + abt
Calculations:

Three selected points

Year Observation t T=K+abt K


1995 6.8429 1 6.8429 5.387840561
1996 7.0243 2 7.02347214 5.387840561
1997 7.0666 3 7.226453191 5.387840561
1998 7.0529 4 7.454624088 5.387840561
1999 6.7945 5 7.711110878 5.387840561
2000 7.0945 6 7.999427549 5.387840561
2001 7.717 7 8.323524173 5.387840561
2002 8.1911 8 8.687841023 5.387840561
2003 8.5702 9 9.097369411 5.387840561
2004 9.2227 10 9.557720064 5.387840561
2005 10.0752 11 10.0752 5.387840561
2006 11.647 12 10.65689893 5.387840561
2007 12.6035 13 11.31078641 5.387840561
2008 13.724 14 12.045821 5.387840561
2009 14.6939 15 12.872073 5.387840561
2010 15.9344 16 13.80086246 5.387840561
2011 16.7902 17 14.84491422 5.387840561
2012 17.3739 18 16.01853227 5.387840561
2013 18.5253 19 17.33779573 5.387840561
2014 19.7821 20 18.82077912 5.387840561
2015 20.4878 21 20.4878 5.387840561

x1= 6.8429

x2= 10.0752
x3= 20.4878
b= 1.124099494
1.294422288
a=
5.387840561
k=

Partial Sums

Year Observations t Tt k
1995 6.8429 1 6.145947 3.685961
1996 7.0243 2 6.407292 3.685961
1997 7.0666 3 6.696402 3.685961
1998 7.0529 4 = S1 7.016226 3.685961
1999 6.7935 5 7.370028 3.685961
2000 7.0945 6 7.761417 3.685961
2001 7.717 7 8.194387 3.685961
2002 8.1911 8 8.673355 3.685961
2003 8.5702 9 = S2 9.203208 3.685961
2004 9.2227 10 9.789352 3.685961
2005 10.0752 11 10.43777 3.685961
2006 11.647 12 11.15507 3.685961
2007 12.6035 13 11.94857 3.685961
2008 13.724 14 12.82638 3.685961
2009 14.6939 15 13.79744 3.685961
2010 15.9344 16 14.87167 3.685961
2011 16.7902 17 16.06002 3.685961
2012 17.3739 18 = S3 17.37462 3.685961
2013 18.5253 19 18.82888 3.685961
2014 19.7821 20 20.43764 3.685961
2015 20.4878 21 22.21732 3.685961

S1 49.5917
S2 74.0337
S3 123.5876

S2 - S1 24.442
S3 - S2 49.5539
S3 - 2S2 +
S1 25.1119

b= 1.106238
a= 2.223739
k= 3.685961
Graph:
Three selected points

TIME PLOT
25

20

15

10

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Observation T=K+abt K

Partial Sums
TIME PLOT
25

20

15

10

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Observations Tt

Result:
The trend line has been estimated and plotted on the graph.
Tt = k + abt

Three selected points


a = 1.2944
b = 1.1240
k = 5.3878

Partial Sums
a = 2.2237
b = 1.1062
k = 3.6851

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