Chapter15AnalyzingandForecastingTime-SeriesData.pptVIP

Chapter 15Analyzing and Forecasting Time-Series Data Chapter Goals After completing this chapter, you should be able to: Develop and implement basic forecasting models Identify the components present in a time series Compute and interpret basic index numbers Use smoothing-based forecasting models, including single and double exponential smoothing Apply trend-based forecasting models, including linear trend, nonlinear trend, and seasonally adjusted trend The Importance of Forecasting Governments forecast unemployment, interest rates, and expected revenues from income taxes for policy purposes Marketing executives forecast demand, sales, and consumer preferences for strategic planning College administrators forecast enrollments to plan for facilities and for faculty recruitment Retail stores forecast demand to control inventory levels, hire employees and provide training Time-Series Data Numerical data obtained at regular time intervals The time intervals can be annually, quarterly, daily, hourly, etc. Example: Year: 1999 2000 2001 2002 2003 Sales: 75.3 74.2 78.5 79.7 80.2 Time Series Plot the vertical axis measures the variable of interest the horizontal axis corresponds to the time periods Time-Series Components Trend Component Long-run increase or decrease over time (overall upward or downward movement) Data taken over a long period of time Trend Component Trend can be upward or downward Trend can be linear or non-linear Seasonal Component Short-term regular wave-like patterns Observed within 1 year Often monthly or quarterly Cyclical Component Long-term wave-like patterns Regularly occur but may vary in length Often measured peak to peak or trough to trough Random Component Unpredictable, random, “residual” fluctuations Due to random variations of Nature Accidents or unusual events “Noise” in the time series Index Numbers Index numbers allow relative comparisons over time Index numbers are reported relative to a Base Period Index Base peri