Trend & Seasonal-Decomposition - Classical...

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Classical Decomposition Technique for Trend Models With Seasonal Variation Situation: Model has been observed to have linear trend and 4-period seasonal variation over 20 periods. Required: Forecast for the next 4 periods (21-24) using regression. 1. Determine (centered) moving averages. Centered Moving averages for n Periods If n is odd , average the first n values and place at middle value If n is even , use n+1 values. Weight the middle (n-1) values by 1/n Weight the end points by 1/2n Place at middle value of the (n+1) values Start with first value. End when period n represents the last end point Here we have a 4-period moving average. Use 5 values. First centered moving average is centered at period 3. =.125*(B2+B6)+.25*SUM(B3:B5) Drag D4 to D5:D19 . Cell D19 has cell B21 as an end point
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2. For periods with a centered moving average, determine period factors. = B4/D4 Drag E4 to E5:E19
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3. Determine Unadjusted Seasonal Factors. For each season, average the corresponding period factors.
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