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Unformatted text preview: 1 ECON1320 Quantitative Economics and Business Analysis B LECTURE 7 Times Series A Section 16.1 – 16.3 2 Today’s Topics 1. Components of a time series 2. Smoothing techniques for forecasting 3. Trend analysis for forecasting 3 Background s The study of business and economic activities usually requires the analysis of data that has been collected over a period of time. s Any series of observations that can be arranged chronologically is known as a time series. The analysis of such series is called time-series analysis. s A basic assumption underlying time-series analysis is that the factors that have given rise to the variations in a time series will persist into the future in more or less the same manner. s A major goal of time-series analysis is to identify these influencing factors. We can then use this knowledge for forecasting purposes. 4 The Importance of Forecasting Business executives, government policy makers, economists and speculators are often interested in forecasting future values of time series: s Governments forecast unemployment, interest rates, and expected revenues from income taxes for policy purposes s Marketing executives forecast demand, sales, and consumer preferences for strategic planning s College administrators forecast enrollments to plan for facilities and for faculty recruitment s Retail stores forecast demand to control inventory levels, hire employees and provide training 5 Time-Series Data s Numerical data obtained at regular time intervals s The time intervals can be annually, quarterly, daily, hourly, etc. Example: Year: 1999 2000 2001 2002 2003 Sales (AUD million): 75.3 74.2 78.5 79.7 80.2 6 Time-Series Plot s the vertical axis measures the variable of interest s the horizontal axis corresponds to the time periods A time-series plot is a two-dimensional plot of time series data 2 7 Time-Series Components Time Series Cyclical Component Irregular Component Trend Component Seasonal Component 8 Time-Series Components - summary Strikes, natural disasters, political events Erratic, non-systematic and unpredictable variations Irregular Macroeconomic conditions, monetary policy Fluctuations that repeat themselves in a regular way at intervals of longer than a year Cyclical Climate, social or religious customs Fluctuations that repeat themselves in a regular way every year Seasonal Changes in tastes, wealth, population, technology Long –term upward or downward movement over several years Trend Possible cause Description Component 9 Time-series components Trend Irregular Seasonal Cyclical 10 Trend Component s Long-run increase or decrease over time...
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This note was uploaded on 10/21/2009 for the course ECON 1320 taught by Professor John during the Three '08 term at Queensland.
- Three '08