BUSI/BMIS 405

CHAPTER 2 NOTES
Seven years of great abundance are coming throughout the land of Egypt !0 but seven years of famine "ill follo" them# $hen all the abundance in Egypt "ill be forgotten and the famine "ill ravage the land# !% $he abundance in the land "ill not be remembered because the famine that follo"s it "ill be so severe# !& $he reason the dream "as given to 'haraoh in t"o forms is that the matter has been firmly decided by God and God will do it soon# (nd no" let 'haraoh loo) for a discerning and "ise man and put him in charge of the land of Egypt# !4 *et 'haraoh appoint commissioners over the land to ta)e a fifth of the harvest of Egypt during the seven years of abundance# !5 $hey should collect all the food of these good years that are coming and store up the grain under the authority of 'haraoh to be )ept in the cities for food# !+ $his food should be held in reserve for the country to be used during the seven years of famine that "ill come upon Egypt so that the country may not be ruined by the famine#, -.enesis 4%/&01!+2

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%# $he forecast process -3ilson and 4eating &0052/

a# Specify objectives/ ho" the forecast "ill be used 6orecast the enrollment for *iberty University budgeting purpose b# 7etermine what to forecast/ define the variables 8esidential enrollment and online enrollment c# Identify time dimensions/ annual 9uarterly monthly "ee)ly or daily 6all and Spring semesters d# 7ata considerations/ Time series -over a period of time2 or cross sectional -at a point in time2 data Internal or e:ternal data 'rivate or public source ;our turn/ data sources for *iberty University enrollment

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e# Model selection/ 'lot the data 7ata pattern, quantity of historical data and forecast horizon -$able &#%2 f# Model evaluation -8MSE2/ Fit -historical period in the sample2 Accuracy -holdout period out of the sample ex-post forecast2 Ex-ante forecast ;our turn/ the actual data are from %500 to &0%% 1 e:<ante period &0%& historical period ===== and holdout period ======= g# 6orecast preparation/ (ctual forecast -ex-ante forecast2 << the length of holdout period > the length of actual forecast period# Combined forecast h# 6orecast presentation/ $he presentation should be understandable to the decision ma)ers i# rac!in" results/ 8evie" the pattern of forecast errors over time for improving the forecast accuracy &# ime-series data pattern/ a# rend/ $he lon"<term change in the level of the data up"ard -positive2 do"n"ard -negative2 or flat -stationary2 linear or nonlinear b# #easonal/ $he pattern repeats itself at the same time every year ;our turn/ is there seasonality in the annual data? ;our turn/ 3hat is the best time to go to the @irginia Beach? c# Cyclical/ 3aveli)e fluctuation around the trend Business cycles d# $rre"ular/ %andom fluctuation Aaused by unanticipated or nonrecurring factors !# Some data and e:amples of model selection -$able &#%2/ a# 'opulation in the U#S# -6igure &#%2 linear trend ( linear e9uation 'B' > a C b $ a and b are coefficients and $ is time variable b# $otal houses sold -6igure &#&2 $rend seasonality and cycle $ime<series decomposition

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c# 7isposable personal income# -6igure &#!2 &onlinear trend ( 9uadratic e9uation 7'I>aCb%$Cb&$& d# .ap 9uarterly sales ;our turn/ the data pattern? 4# Aorrelogram or autocorrelation function/ a# ( )<period plot of autocorrelation b# Autocorrelation/ the correlation bet"een successive observations of a variable over time order ) autocorrelation coefficient -r! or ACF'!(2# = = = n n ACF'!( > D -;t<)<;2-;t<;2 / D -;t<;2&
t>)C% t>%

n/ the number of observationsE )/ the number of lags t ;t ;t<% ;t<& % %0 << << & %! %0 << ! %% %! %0 4 %5 %% %! 5 %0 %5 %% + %! %0 %5 (A6-%2 is the correlation bet"een ;t and ;t <% (A6-&2 is the correlation bet"een ;t and ;t <& c# $he significance of (A6-)2 -the case of (A6-%&2 for 7'I2/ t<test -see footnotes 5 and + on pages 04 and 05 of the te:t2/ set up t"o hypotheses/ null hypothesis -F02 and alternative hypothesis -F%2 calculate t<value Aompare the calculated t<value and the critical t<value -$able &#52 Ma)e the decision to reGect or not to reGect the null hypothesis -3e "ill revie" t<test in chapter 42 $he rule of thumb/ reGect F0 if H r) H I &/Jn that is (A6-)2 is significantly different from Kero# n is the number of observations# Use (A6 graph e:amine (A6s "ith upper limit and lo"er limit# 6orecastL/ highlight the data Forecast )ethod *review for the graph Analyze for (A6 +i,,erencin" -non<seasonal2 Export for printing# 5# Use (A6 to identify the data pattern/ a# ( stationary series/ the value of (A6 diminishes rapidly -drops after the second or third time lag2 to"ard Kero as) increases UMIAS -c%f52 b# ( series "ith the trend -a non<stationary series2/ the value of (A6 declines to"ard Kero slowly 7'I -c4t!2 and $FS -c&f%02 c# ( series "ith seasonality/ (A6 --, . M2 is significant for quarterly data and (A6 -/0, 0- M##2 is significant for monthly data

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N7'I -c&f02 and N$FS -c&f%02

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BUSI/BMIS 405

d# ( random series/ (A6 for all lags are not significantly different from Kero "hite noise -cOt&2 e# ;our turn/ .ap sales +# 6rom the 3ilson and 4eating te:t complete 9uestions 0 5 %0 and %% from the E:ercises section at the end of chapter &# 7iscuss these 9uestions in your assigned .roup 7iscussion Board for credit before submitting your ans"ers in E:cel via the 3ee)ly E:ercise & assignment lin)#

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