STATISTICS

IN ECONOMICS AND BUSINESS

Nguyen Huyen Trang

Faculty of Statistics - National Economics University
[email protected]
 LECTURE 9: TIME SERIES ANALYSIS

• Introduction to Time Series Analysis and forecasting

• Analysis of fluctuation characteristics
• Analysis of time series components
 WHAT IS TIME SERIES DATA?

A time series is a set of numerical measurements

of the same entity taken at equally spaced intervals
over time.

The data can be collected yearly, quarterly,

monthly, weekly, daily or even hourly.
 ANALYSIS OF FLUCTUATION
CHARACTERISTICS

• The mean
• Absolute increase (decrease)
• The growth factor
• The growth rate
• Absolute value of 1% growth rate
 MEAN

• Example: Revenue of firm A from 2014 to 2019

Year Revenue (thousand $)

2014 4.5 Average of
2015 5.3 revenue???
2016 6.2
 xi
2017 7.8 x=
2018 8.9 n
2019 9.3
 ABSOLUTE INCREASE
(DECREASE)

• Example: Revenue of firm A from 2014 to 2019

Revenue Absolute increase
Year
(thousand $) of revenue in each year???
2014 4.5 i = xi – xi-1
2015 5.3
2016 6.2
Average of revenue’s absolute
2017 7.8 increase during the period???
2018 8.9
σ𝑛𝑖=2 𝛿𝑖 𝑥𝑛 − 𝑥1
2019 9.3 𝛿= =
𝑛−1 𝑛−1
 GROWTH FACTOR VS GROWTH RATE

• Growth factor is the factor by which a quantity multiplies itself

over time

𝑅𝑒𝑣𝑖 110
𝐺𝑟𝑜𝑤𝑡ℎ 𝑓𝑎𝑐𝑡𝑜𝑟 𝑜𝑓 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = = = 1.1
𝑅𝑒𝑣𝑖−1 100

→ Revenue this year is 1.1 times higher than last year

• Growth factor < 1: negative growth

• Growth factor > 1: positive growth
 GROWTH FACTOR VS GROWTH RATE

• Growth rate is the addend by which a quantity increases (or

decreases) over time

Revi − Revi−1 110 − 100

Growth rate of Revenue = = = 0.1
Revi−1 100
Percent change = Growth rate x 100 = 0.1 x 100 = 10%

→ Revenue this year increased 10% compared to last year.

• Growth rate < 0: negative growth
• Growth rate > 0: positive growth
 GEOMETRIC MEAN

• Measure the average growth factor of a variable over

time
• Calculate some indexes

Business Decision Making – Nguyen Minh Thu – [email protected]

 GEOMETRIC MEAN

Example: Year Growth factor of revenue (%)

2014 105.25
2015 105.42
2016 105.98
2017 106.68
2018 106.21
 GEOMETRIC MEAN

Year Year
Percent change Growth(%)
Percent change factor
(%) (times) 1.029
1 -22.1
1 -22.1 0.779
2 28.7
2 28.7 1.287
3 10.9 • The average annual
3 10.9 1.109
4 4.9 growth factor of revenue
4 4.9 1.049
5 15.8 is 1.029 times
5 15.8 1.158
6 5.5
6 5.5 1.055 • The average annual
7 -37.0
7 -37.0 0.630 percent change (growth
8 26.5
8 26.5 1.265 rate) of revenue is 2.9%
9 15.1
9 15.1 1.151
10 2.1
10 2.1 1.021
Business Decision Making – Nguyen Minh Thu – [email protected]
 ABSOLUTE VALUE OF 1%
GROWTH RATE

absolute increase (decrease)

Absolute value of 1% growth rate =
growth rate (%)
Revenue
Year
(thousand $)
2014 4.5 Absolute value of 1% growth
2015 5.3 rate in 2016???
2016 6.2
2017 7.8
2018 8.9
2019 9.3
 ANALYSIS OF TIME SERIES
COMPONENTS

Time series data has 4 aspects of behavior:

• Trend
• Seasonality
• Cycles
• Unexplained Variation
(further reading)
 LECTURE 10: REVIEW

• Introduction to statistics
• The collection of data
• Techniques to analyze data:
• Descriptive analysis
• Inferential analysis
• Regression (Econometrics)
• Time series analysis
 WHAT IS STATISTICS?

Making decisions
Interpret data
Analyze data
Present data

Organize data

Collect data
 SOME CONCEPTS

• Certainty vs Uncertainty

• Population vs Sample

• Parameters vs Statistics

• Data: Observation – Variable - Value

 TYPE OF DATA

Cross-sectional Data Time Series Data Panel Data

Time is fixed! Object is fixed! Multi object over time

Eg: 63 provinces’ Eg: Hanoi’s annual Eg: 63 provinces’

economic economic annual economic
information in 2018 information from information from 2000
2000 to 2018 to 2018
 STRUCTURE OF A DATASET

• Observation: the person or thing on which measurements

are taken
• Variable: A measured characteristic of an observational
unit
• Value
Variables
English Maths
No. Name Sex Age …
Mark Score
1 Anderson M 19 A 8 …
Observations

2 Berky F 20 C 9 …
3 Charles M 20 B 7
… … … … … …. ….
 TYPE OF VARIABLES

Qualitative (Categorical)

attribute

Quantitative (Numerical)

number
 QUANTITATIVE VARIABLE

Discrete or Continuous

Result from: Result from:

- counting or labelling observations - measuring (length, weight etc) to
any degree of precision.

• The number of cars sold in the UK in 2017 • The salary of employees

• The age of a person in years • The distance between places
• The size of clothes (80, 90, 100,...) • The productivity of workers
 DATA MEASUREMENT

• Nominal
• Ordinal
• Interval
• Ratio
 LEVEL OF MEASUREMENT

Qualitative (Categorical) Quantitative (Scale)

Nominal Ordinal Discrete Continuous

Listing, Listing, Interval Ratio
Grouping Grouping,
Sorting, Listing, Grouping, Sorting
Maybe ± Math operation: ±, , ÷, …
Coded by numbers Used to rank
SOURCES OF DATA
 SAMPLING PROCESS

Define Population

Specify Sampling Frame

Determine Sampling Method

Probability Sampling Non-Probability Sampling

Determine Appropriate
Sample Size

Execute Sampling Design

TYPES OF SAMPLING
SURVEY METHODS
 THEORY OF SAMPLING

• Normal Distribution
• Standardizing
• The Central Limit Theorem
 NOTES ABOUT THE NORMAL
DISTRIBUTION

1. E(X) = μ; V(X) = σ².

2. Area under curve = 1
3. Different means – move curve to the left or right of
the x-axis
4. Different variances – curve becomes more peaked
5. Shorthand notation: X~N(μ, σ²).
 STANDARDIZING

All variables measured by marketers can be represented by the "standard"

normal distribution.
The process of converting any Normal random variable to a Standard
Normal Random Variable.
• A special form of the normal distribution or bell curve.
• Mean=0
• Standard deviation = 1 in all cases

35
 THE CENTRAL LIMIT THEOREM

Whatever the population distribution looks like (normal

or not), when a sample size is large enough, the
distribution of sample means will be normal, and we can
use Z-statistic to calculate probability of any mean value.
STRUCTURE OF THE QUESTIONNAIRE
OUTLINE
 DESCRIBING FOR QUALITATIVE DATA

Qualitative
data

Tabulating Graphing
Data Data

Frequency Relative
Bar Chart Pie Chart
Distribution Table Frequency Table

Side – by – side Stacked Bar

Crosstabulation
bar chart Chart
 DESCRIBING FOR QUANTITATIVE DATA

Quantitative
data

Tabulating Graphing
Data Data

Frequency
Relative Frequency Common Stem-and-
Distribution
Table Charts Leaf Display
Table

Cumulative Cumulative Relative

Frequency Frequency Histogram Ogive
Distribution Distribution

Scatter
Crosstabulation Polygon
Diagram
 DATA MEASUREMENT

Summary
Measures

Central Measures of
Tendency Dispersion

Standard
Mean Median Variance
Deviation

Coefficient of
Mode Variation
Quartile
 MEAN, MODE, MEDIAN

Negatively skewed Positively skewed

Left skewed Symmetric Right skewed

Mean
Median
Mean < Median < Mode Mode Mode < Median < Mean
 QUARTILES

Quartiles are specific percentiles, divides the data into 4 equal parts
by 3 cut-off points
• First Quartile Q1 = 25th Percentile
• Second Quartile Q2 = 50th Percentile = Median
• Third Quartile Q3 = 75th Percentile

25% 25% 25% 25%

Q1 Q2 Q3
 BOX AND WHISKER PLOT

▪ Boxplot 1
min max
Q1 Q2 Q3

▪ Boxplot 2 IQR = Q3 – Q1
outlier
Q1 – 1.5IQR Q3 + 1.5IQR

Lower limit: the maximum of Upper limit: the minimum of

(min, Q1-1.5*IQR) (max, Q3+1.5*IQR)
 INFERENCE STATISTICS

• Estimation:
Inferential Approximating the actual
Statistics values of parameters
Population • Hypothesis Testing:
Confirm or disprove about the
Population population parameters
parameters Random Sample
Sample
Sampling statistics

Sampling
 CONFIDENT INTERVAL FOR MEAN

Can the population NoNo

Yes
standard deviation be
assumed known?

Is the sample size

𝜎 large?
𝑥ҧ ± 𝑧𝛼/2
𝑛
No Yes
Yes No

𝑆 𝑆
𝑥ҧ ± 𝑧𝛼/2 𝑥ҧ ± 𝑡𝛼/2
𝑛 𝑛
 CONFIDENT INTERVAL
FOR PROPORTION

𝑝(1
ҧ − 𝑝)ҧ 𝑝(1
ҧ − 𝑝)ҧ
𝑧𝛼/2 × 𝑧𝛼/2 ×
𝑛 𝑛

Lower Confidence Upper Confidence

Limit Limit
ഥ)
Point Estimation (𝐩

Width of
confidence interval
 SUMMARY OF TEST STATISTICS

Yes No
n > 30 ?
No
Ϭ known ? Popul.
Yes
approx.
Yes normal
Use s to
stimate Ϭ No ?
Ϭ known ?
No
Yes Use s to
estimate Ϭ

x − x − x − x − Increase n
z= z= z= t=
/ n s/ n / n s/ n to > 30
 COMPARING WITH CRITICAL VALUE

Statistical Critical
Hypothesis Reject H0
value value
 TEST ABOUT
THE POPULATION PROPORTION

Hypothesis:
• Two tail:
H0: p = p0
H1: p ≠ p0
• Left tail:
H0: p = p0
H1: p < p0
• Right tail:
H0: p = p0
H1: p > p0
 TEST STATISTICS

• Large sample (np ≥ 5 and n(1-p) ≥ 5)

ഥ − 𝐩𝟎
𝐩
𝐳=
𝛔𝐩ഥ
𝑝0 (1− 𝑝0 )
where: 𝜎𝑝ҧ =
𝑛
• Rejection rule

Left tail Right tail Two tail

Z < -Zα Z > Zα |Z| > Zα/2

 TIME SERIES ANALYSIS

• The mean
• Absolute increase (decrease)
• The growth factor
• The growth rate
• Absolute value of 1% growth rate
 STRUCTURE OF FINAL EXAM
(60 minus)

• PART 1: THEORY (4 points)

➢ True/ False (5 sentences)
➢ Multiple choice questions (Circle the BEST answer) (5
sentences)
• PART 2: EXERCISE (6 points)