Professional Documents
Culture Documents
John
Loucks
St. Edward’s
University
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1
Chapter 15, Part A
Time Series Analysis and Forecasting
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2
Forecasting Methods
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3
Forecasting Methods
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
4
Quantitative Forecasting Methods
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5
Time Series Methods
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Forecasting Methods
Forecasting
Methods
Quantitative Qualitative
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Time Series Patterns
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8
Time Series Plot
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Time Series Plot
Example
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Time Series Patterns
Horizontal
Trend
Seasonal
Cyclical
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Time Series Patterns
Horizontal Pattern
• A horizontal pattern exists when the data
fluctuate around a constant mean.
• Changes in business conditions can often result in
a time series that has a horizontal pattern shifting
to a new level.
• A change in the level of the time series makes it
more difficult to choose an appropriate forecasting
method.
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Time Series Patterns
Trend Pattern
• A time series may show gradual shifts or
movements to relatively higher or lower values
over a longer period of time.
• Trend is usually the result of long-term factors
such as changes in the population, demographics,
technology, or consumer preferences.
• A systematic increase or decrease might be linear
or nonlinear.
• A trend pattern can be identified by analyzing
multiyear movements in historical data.
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Time Series Patterns
Seasonal Pattern
• Seasonal patterns are recognized by seeing the
same repeating pattern of highs and lows over
successive periods of time within a year.
• A seasonal pattern might occur within a day, week,
month, quarter, year, or some other interval no
greater than a year.
• A seasonal pattern does not necessarily refer to the
four seasons of the year (spring, summer, fall, and
winter).
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
14
Time Series Patterns
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
15
Time Series Patterns
Cyclical Pattern
• A cyclical pattern exists if the time series plot shows
an alternating sequence of points below and above
the trend line lasting more than one year.
• Often, the cyclical component of a time series is due
to multiyear business cycles.
• Business cycles are extremely difficult, if not
impossible, to forecast.
• In this chapter we do not deal with cyclical effects
that may be present in the time series.
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Selecting a Forecasting Method
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Forecast Accuracy
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Forecast Accuracy
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19
Forecast Accuracy
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
20
Forecast Accuracy
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Forecast Accuracy
= Actual Value
in Period t
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
22
Forecast Accuracy
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
23
Forecast Accuracy
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Forecast Accuracy
80
MAE= =8.89
9
850
MSE= =94.44
9
65.35
MAPE= =7.26 %
9
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Moving Averages and Exponential Smoothing
Exponential Smoothing
They are called smoothing methods because their
objective is to smooth out the random fluctuations
in the time series.
They are most appropriate for short-range
forecasts.
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
26
Moving Averages
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
27
Moving Averages
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
28
Moving Averages
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
29
Example: Moving Average
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Example: Moving Average
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Example: Moving Average
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Example: Moving Average
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
33
Weighted Moving Averages
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34
Weighted Moving Averages
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
35
Example: Weighted Moving Average
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
36
Example: Weighted Moving Average
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
37
Exponential Smoothing
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38
Exponential Smoothing
𝑌
^ 𝑡 +1=𝛼 𝑌 𝑡 + ( 1 −𝛼 ) 𝑌^ 𝑡
where:
= forecast of the time series for period t + 1
Yt = actual value of the time series in period t
Ft = forecast of the time series for period t
a = smoothing constant (0 < a < 1)
and let:
𝑌
^ 2= 𝑌
^ 1 (¿ initiate the
computations)
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
39
Exponential Smoothing
𝑌
^ 𝑡 +1=𝑌^ 𝑡 +𝛼
(𝑌 𝑡 − 𝑌
^𝑡)
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
40
Exponential Smoothing
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
41
Example: Exponential Smoothing
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42
Example: Exponential Smoothing
= Y1 = 110
= .1Y2 + .9 = .1(115) + .9(110) = 110.50
= .1Y3 + .9 = .1(125) + .9(110.5) = 111.95
= .1Y4 + .9 = .1(120) + .9(111.95) = 112.76
= .1Y5 + .9 = .1(125) + .9(112.76) = 113.98
= .1Y6 + .9 = .1(120) + .9(113.98) = 114.58
= .1Y7 + .9 = .1(130) + .9(114.58) = 116.12
= .1Y8 + .9 = .1(115) + .9(116.12) = 116.01
= .1Y9 + .9 = .1(110) + .9(116.01) = 115.41
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
43
Example: Exponential Smoothing
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
44
Example: Exponential Smoothing (a = .1)
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45
Example: Exponential Smoothing (a = .1)
Forecast Accuracy
82.95
MAE= =9.22
9
974.22
MSE= =108.25
9
66.98
MAPE= =7.44 %
9
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in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
46
Example: Exponential Smoothing (a = .8)
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Example: Exponential Smoothing (a = .8)
Forecast Accuracy
75.19
MAE= =8.35
9
847.52
MSE= =94.17
9
61.61
MAPE= =6.85 %
9
Exponential smoothing (with a = .8) provided
more accurate forecasts than ES with a = .1,
but less accurate than the 3-MA.
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48
Optimal Smoothing Constant Value
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49
Optimal Smoothing Constant Value
General Formulation
𝑛
2
^
𝑚𝑖𝑛 ∑ ( 𝑌 𝑡 − 𝑌 𝑡 )
𝑡=2
s.t. = + a Yt-1 + (1 – a) t = 2, 3, … n
= Y1
0<a<1
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50
Example: Optimal Smoothing Constant Value
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51
Example: Optimal Smoothing Constant Value
Objective Function
The objective function minimizes
the sum of the
squared error.
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52
Example: Optimal Smoothing Constant Value
Constraints
The following constraints define
the forecasts as a
function of observed and forecasted values.
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Example: Optimal Smoothing Constant Value
Optimal Solution
a = 0.381
Smoothing constant
= 110 = 120.715
= 110.000 = 120.442
= 111.905 = 124.084
= 116.894 = 120.623
= 118.077 = 116.576
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54
Example: Optimal Smoothing Constant Value
Forecast Accuracy
71.53
MAE= =7.95
9
721.48
MSE= =80.16
9
58.78
MAPE= =6.53 %
9
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55
End of Chapter 15, Part A
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