Statistical

Methods
IPM – Term I, September 2022

Dr. Landis Conrad Felix Michel

1.3 Least-Squares Trend Fitting and
Forecasting
• To make intermediate and long-range forecasts requires identifying the trend component
in a time series. Identifying the trend means being able to develop the most appropriate
model that fits the trend.

• Time series data might fit a linear trend model, a quadratic trend model, or, if the time-
series data increase at a rate such that the percentage difference from value to value is
constant, an exponential trend model.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

The Linear Trend Model

• When using the least-squares method for fitting trends in a time series, one can simplify the
interpretation of the coefficients by assigning coded values to the X (time) variable. One assigns
consecutively numbered integers, starting with 0, as the coded values for the time periods. For
example, in time-series data that have been recorded annually for 8 years, one assigns the coded
value 0 to the first year, the coded value 1 to the second year, the coded value 2 to the third year,
and so on, concluding by assigning 7 to the eighth.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
The Quadratic Trend Model

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
The Exponential Trend Model

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
Model Selection Using First, Second,
and Percentage Differences

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel
References – Additional Readings
• Chapter 16, “Statistics for Managers, Using Microsoft Excel”, 9th Edition, David M. Levine,
David Stephan, Kathryn A. Szabat.

•.

IPM – Term I, September 2022 - Dr. Landis Conrad Felix Michel