Case study: Forecasting using multiple regression

The sales managers of Eugroffal Company have analysed the mid-term sales forecasts. As a
result, they have noticed that the sales of the company can be explained separately or jointly
by the sales of cars and the number of apartment constructions, since these two sectors are the
main users of the products.
The managers have obtained historical data from the federation of automotive constructors
and the ministry of construction over 15 years starting from 1986. In parallel, they have
obtained an estimation of the sales of cars and the number of apartment constructions over 5
years starting from 2001 as shown in the following table.
Year cars (×1000) Apartments (×1000) Sales (m£)

1986 666.6 145 165

1987 533.8 157.5 202
1988 432 167.5 201.5
1989 612 172.3 226
1990 556 197.8 216
1991 792 237.4 291.5
1992 581.5 316.5 298.3
1993 611.3 321.7 310.4
1994 426 350.9 256.8
1995 559 364 303.5
1996 667.5 366 314.5
1997 554.3 371.4 301.4
1998 693 413 328.5
1999 763.9 456.2 389.5
2000 775.2 473.8 438.7
2001 640 485
2002 790 510
2003 840 574.7
2004 860 610
2005 890 662.5

Questions
You are at the end of year 2000. You should propose a forecasting model adapted to this case.
1. Propose two models to determine the glass sales forecasts if the sales of the company can
be explained separately by the sales of cars and the number of apartment constructions.
Discuss the performance quality of these two models.
2. Compare the performance of the previous models to that of the following model where the
sales can be explained jointly by the sales of cars and the number of apartment constructions.

Forecast = 0.6068 * apartment constructions + 0.1553 * cars - 4.938

3. Use the function DROITEREG (LINEST in the English version) in Excel to propose
another double regression forecasting model where the sales can be explained jointly by the
sales of cars and the number of apartment constructions. Compare the performance of the
obtained model to the previous one.
4. Calculate the sales forecasts from 2001 to 2005 by using the best forecasting model.