Business Statistics 101

Chapter 08 Time Series

 †h me †jL‡Ki eB †_‡K cÖ‡kœi aiY †h mv‡ji cixÿvq

AsK/w_Dwi †bqv n‡q‡Q: G‡m‡Q

Moving Average Method 2010, 11, 12, 14, 2016

 Gupta & Gupta (18e)
(MRK)
 Leonard J. Kazmier, Ph.D. (2003)
Least Square Method 2008, 2012, 2014, 2016
 NU Questions (up to 2017)

Kvjxb mvwi (Time Series) m¤ú‡K© cÖv_wgK aviYv1

Avgiv Rvwb, mg‡qi cwieZ©‡bi mv‡_ mv‡_ †Kvb Z_¨mvwii cwieZ©b nq| aiv hvK, 1
weNv Rwg‡Z 2015 mv‡j 40 gY avb Drcvw`Z nq| GKB Rwg‡Z 2016 mv‡j 45 gY avb
Drcvw`Z n‡jv| mg‡qi cwieZ©‡bi mv‡_ cwimsL¨v‡bi GB mvRv‡bv Z_¨gvjv‡KB Kvjxb
mvwi e‡j| A_©vr, mg‡qi cwieZ©‡bi mv‡_ mswkøó cwiewZ©Z Z_¨ivwk‡K Kvjxb mvwi
ejv nq| D`vniYt
Year 2011 2012 2013 2014 2015 2016
Sales 40 42 44 48 50 64

mg‡qi cwieZ©‡b Z_¨gv‡bi cwieZ©b bvbvwea Kvi‡Yi Dci wbf©ikxj| Kvjxb mvwi
we‡køl‡Y Giƒc KviYmg~n‡K cÖavYZ Pvifv‡M fvM Kiv n‡q‡Q| Gi cÖ‡Z¨K fvM‡K Kvjxb
mvwii Dcv`vb (Components of Time Series) e‡j| G¸‡jv n‡”Qt

(1) Trend/ Secular Trend (mvaviY aviv ev `xN©¯’vqx cÖeYZv)

(2) Seasonal variations (FZzMZ †f`)
(3) Cyclical variation (PµµwgK n«vm-e„w×)
(4) Irregular variations (AwbqwgZ MwZ)

 Components of Time Series [TSCI]:

1) Secular Trend (T): The general long-term movement in the time series values over an
extended period of years.
2) Seasonal variations(S): Seasonal variations are those periodic movements in business
activity which occur regularly every year.
3) Cyclical Variations (C): Recurring up and down movements with respect to trend that
have duration of several years.

1
cwimsL¨vb cwiwPZ (1997), evsjv‡`k Db¥y³ wek^we`¨vjq, c„. 239|
 ethods of Measuring Trend
Components of Time Series
102 Chapter  8 : Time Series

4) Irregular Variations (I): Irregular variations refer to such variations in business

activities which do not repeat in a definite pattern.

Mathematical Model: Y t =f ( TSCI )

(1) Trend (i) Graphic or freehand method

(2) Seasonal variations (ii) Semi-average method
(3) Cyclical variation (iii) Moving average method
(4) Irregular variations (iv) Least Squares Method

 Semi-average method:
Total of first half
Average of the first half =
No . of year of first half

Total of second half

Average of the second half =
No . of year of second half
 For Moving average method:
a+b+ c b+ c+ d c+ d+ e d +e +f
3 yearly moving average= , , , ,…………
3 3 3 3

a+b+ c+ d b+ c+ d+ e c +d + e+ f d+ e+ f + g
4 yearly moving average= , , , ,… … … …
4 4 4 4

 Method of least squares:

(i) The equation of the straight line trend: Y =a+bX

Where a=
∑Y, b=
∑ XY
N ∑ X2
(ii) Elimination of Trend from time series:

Actual data (Y ) TSCI

Y e= ×100∨, Y e = ×100
Trend value (T ) T
 Business Statistics 103

b
(iii) Monthly Increase ¿
12

X [deviation = wePz¨wZ] wbY©‡qi †ÿ‡Î KiYxq [Method of least squares]

 cÖ`Ë mvj we‡Rvo msL¨K n‡j: cÖ‡Z¨K mvj †_‡K ga¨eZ©x mvj we‡qvM Ki‡jB X
cvIqv hv‡e| ∑ X=0 n‡e|
 cÖ`Ë mvj †Rvo msL¨K n‡j: cÖ‡Z¨K mvj †_‡K ga¨eZ©x `ywU gv‡bi Mo we‡qvM
K‡i we‡qvMdj 2 Øviv ¸Y Ki‡jB X cvIqv hv‡e|
 wb‡¤œv³ †ÿ‡Î As‡Ki mv‡_ Graph-I w`‡Z n‡e

Semi Average Method 1. Fit a trend line by the method of semi-average

2. Estimate the profit for 2020
3. Predict the sale for the year 2022

Moving average Method 1. Calculate 3/ 4-yearly moving average and show its trend.
2. Represent the following data by a graph.

Least Squares Method 1. Plot the given data on a graph paper.

2. Draw a line from the following information.
104 Chapter  8 : Time Series

Chapter Exercise : Part B and C 08

Problem-1 Measure trend to the following data by the method of semi-average:

Year 2010 2011 2012 2013 2014 2015
Sales 28 20 24 28 32 33

Solution P-1:
Calculation of Trend (Semi-average Method)
Year Sales Semi-total Semi-average
2010 28
2011 20 72 24
2012 24
2013 28
2014 32 90 30
2015 30

Problem-2 Measure trend to the following data by the method of semi-average:

Year 2011 2012 2013 2014 2015 2016
Sales 40 42 44 48 50 64
[hints: Average of 1st half= 42; 2nd half= 54]

Problem-3 From the following data determine the trend by the method of semi-average:
Year 2010 2011 2012 2013 2014 2015 2016
Sales 22 20 36 30 29 30 37
[hints: Average of 1st half= 26; 2nd half= 32]

Problem-4 From the following data determine the trend by the method of semi-average:
Year 2008 2009 2010 2011 2012 2013 2014
Sales 52 50 60 45 56 50 44
 Business Statistics 105

[hints: Average of 1st half= 54; 2nd half= 50]

Problem-5 Find the 3 yearly moving averages from the following time series.
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Price 362 354 367 368 365 364 353 355 371 389 410 405 406

Calculation of 3 yearly Moving average

Year Price 3 yearly 3 yearly moving
moving totals average
2004 362 --- ---
2005 354 1083 361.00
2006 367 1089 363.00
2007 368 1100 366.67
2008 365 1097 365.67
2009 364 1082 360.67
2010 353 1072 357.33
2011 355 1079 359.67
2012 371 1115 371.67
2013 389 1170 390.00
2014 410 1208 401.33
2015 405 1221 407.00
2016 406 --- ---

Problem-6 Find the 3 monthly moving averages from the following series.
Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales (Tk) 19 20 30 31 30 25 20 15 10 9 10 14

Problem-7 [NU 2nd year 2016 (MRK)] Given below the figures of production (in million tones) of a
factory:
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Production 50 55 57 50 56 60 62 57 61 64
Determine trend values by 3 yearly moving average method.

Problem-8 Calculate 4 yearly Moving Average from the following data and determine general trend of the
series:
Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
106 Chapter  8 : Time Series

Price 10 7 9 10 8 11 10 11 12 15

Solution P-8:
Calculation of the Centered 4 yearly Moving average
Year Price 4 yearly moving 4 yearly moving 4 yearly centered
totals average moving average
2005 10 --

2006 7 --
36 9.00
2007 9 8.75
34 8.50
2008 10 9.00
38 9.50
2009 8 9.625
39 9.75
2010 11 9.875
40 10.00
2011 10 10.50
44 11.00
2012 11 11.50
48 12.00
2013 12 --

2014 15 --

Problem-9 [Gupta & Gupta (18e), p.379] Work out the centered 4-yearly moving average for the following
data:
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Price 1102 1250 1180 1340 1212 1317 1452 1549 1586 1476 1624 1586

Problem-10 [Gupta & Gupta (18e), p.371] Fit a trend line to the following data by the method of semi
average:
Year 2008 2009 2010 2011 2012 2013 2014
Sales of firm A (‘000 units) 102 105 114 110 108 116 112

Problem-11 Apply the method of semi-average to predict the long term tendency of the following data and
estimate the value for 2018.
 Business Statistics 107

Year 2010 2011 2012 2013 2014 2015 2016

Production (million tones) 50 54 52 58 62 60 64
[hints: Average of 1st half = 52 and 2nd half = 62]

Problem-12 Fit the trend line to the following data by the method of semi-averages and estimate the sales for
the year 2017:
Year 2010 2011 2012 2013 2014 2015 2016
Sales (Thousand Units) 102 105 114 110 111 122 125

Problem-13 From the following data calculate 5-yearly moving average:

Year 198 198 198 198 198 198 199 199 199 199 199 199 199
4 5 6 7 8 9 0 1 2 3 4 5 6
Production 102 110 100 95 108 112 100 75 60 80 92 84 99
Ans. 103, 105, 103, 98, 91, 85.4, 81.4, 78.2, 83.

Problem-14 [BBS 3rd year 2007, 2010] Calculate 4-yearly moving average form the following data and
show its trend:

Year 1996 1997 1998 1999 2000 2001 2002 2003

Price 153 170 120 200 240 280 300 120

Calculation 4 yearly Moving average Centered

Year Price 4 yearly moving 4 yearly moving 4 yearly moving
total average average Centered
1996 153 --

1997 170 --
643 160.75
1998 120 171.625
730 182.50
1999 200 196.25
840 210.00
2000 240 232.50
1020 255.00
2001 280 245.00
940 235.00
2002 300 --

2003 120 --
108 Chapter  8 : Time Series

Problem-15 [NU 2nd year 2013] Below are given the figures of production (in thousands tones) of fertilizer
factory:
Year 2000 2001 2002 2003 2004 2005 2006
Production 70 75 90 98 85 91 100
Calculate 4-yearly moving average by the above data.

Problem-16 [NU 2nd year 2011] From the following data, calculate the trend values using 3 yearly moving
average:
Year 2005 2006 2007 2008 2009 2010
Production 412 438 445 470 483 490

Problem-17 [NU 2nd year 2014 (Acc)] Fit the trend value of 3 yearly moving average from the following
data:
Year 1990 1991 1992 1993 1994 1995 1996 1997
Sales 30 45 39 41 42 46 47 49

Problem-18 The following are annual profits in a certain business:

Year: 2010 2011 2012 2013 2014 2015 2016
Profits (in thousand Tk) 60 72 75 65 80 85 95

Use the method of least squares to fit a straight line to the above data. Also make an estimate of profits in
2017.
Solution P-18:
Calculation of Trend
(Method of Least Squares)
Profit Deviation from 2
Year
(y) midyear (x)
xy x
2010 60 -3 - 180 9
2011 72 -2 - 144 4
2012 75 -1 - 75 1
2013 65 0 0 0
2014 80 1 80 1
2015 85 2 170 4
2016 95 3 285 9
N =7
∑ y=¿ 532¿ ∑ xy =¿ 136∑¿ x 2=28
We know, The equation of the straight line trend is Y = a + bX
∑ y = 532 =76. b=
∑ xy = 136 =4.86  Y = 76 + 4.86X
a=
N 7 ∑ x 2 28
Estimated Profit for 2017: Y = 76 + 4.86X = 76 + 4.86 × 4 = Tk 95.44 thousands
Thus the estimated profit for the year 2017 would be Tk 95.44 (thousands).
 Business Statistics 109

Problem-19 Fit a straight line trend by the method of least squares to the following data. Assuming that the
same rate of change continues, what would be the predicted earnings for the year 2015?

Year: 2006 2007 2008 2009 2010 2011 2012 2013

Earning (Tk. lakhs): 38 40 65 72 79 60 87 95

Solution P-19:
Calculation of Trend
(Method of Least Squares)
Year Earning Deviation from Deviations
(Y) mid year Multiplied by 2 XY X2
i.e. 2009.5 (X)
2006 38 - 3.5 -7 - 266 49
2007 40 - 2.5 -5 - 200 25
2008 65 - 1.5 -3 - 195 9
2009 72 - .5 -1 - 72 1
2010 79 .5 1 79 1
2011 60 1.5 3 180 9
2012 87 2.5 5 435 25
2013 95 3.5 7 665 49
N=8
∑ Y =¿ 536 ¿ ∑ XY =¿ 626∑¿ x 2=168
We know, The equation of the straight line trend is Y = a + bX
∑ y = 536 =67. b=
∑ xy = 626 =3.73  Y = 67+ 3.73X
a=
N 8 ∑ x 2 168
Calculation of estimated earnings in 2015: Y = 67 + 3.73X = 67 + 3.73 × 11 = 108.03

Thus the estimated earnings for the year 2015 would be Tk. 108.03 (lakhs).
110 Chapter  8 : Time Series

Problem-20 [NU 2nd year 2012, 3rd year 2016] Fit a trend line by the method of least squares to the
following data:
Year 2005 2006 2007 2008 2009 2010 2011 2012
Sales 38 40 60 70 75 60 85 95
Plot the given data on a graph paper and estimate the sales for the year 2013.

Solution P-20:
Calculation of Trend
(Method of Least Squares)
Year Sales Deviation from Deviations
(Y) mid year Multiplied by 2 XY X2
i.e. 2008.5 (X)
2005 38 -3.5 -7 -266 49
2006 40 -2.5 -5 -200 25
2007 60 -1.5 -3 -180 9
2008 70 -0.5 -1 -70 1

2009 75 0.5 1 75 1
2010 60 1.5 3 180 9
2011 85 2.5 5 425 25
2012 95 3.5 7 665 49
N=
8 ∑ Y =¿ 523 ¿ ∑ X=¿ 0 ¿ ∑ XY =¿ 629∑¿ x 2=168

We know, The equation of the straight line trend is Y = a + bX

∑ y = 523 =65.375 . b=
∑ xy = 629 =3.744  Y = 65.375+ 3.744X
a=
N 8 ∑ x 2 168
Calculation of trend value

Y 2005 = 65.375+ 3.744 (-7) = 39.17

Y 2006 = 65.375+ 3.744 (-5) = 46.65
Y 2007 = 65.375+ 3.744 (-3) = 54.14
Y 2008 = 65.375+ 3.744 (-1) = 61.63
Y 2009 = 65.375+ 3.744 1 = 69.12
Y 2010 = 65.375+ 3.744 3 = 76.61
Y 2011 = 65.375+ 3.744 5 = 84.10
Y 2012 = 65.375+ 3.744 7 = 91.58
 Business Statistics 111

Estimated Sales for 2013: Y = 65.375+ 3.744X = 67 + 3.73 × 9 = 99.07

Problem-21 [NU 2nd year 2014 (Acc)] Fit a trend line by the method of least squares to the following data.
Assuming that the same rate of change continues, what would be the predicted earnings for the year 2012?
Year 2003 2004 2005 2006 2007 2008 2009 2010
Sales (Tk lakh) 71 80 130 144 138 120 174 190
[ y=130.88+7.542 x]

Problem-22 [Gupta & Gupta (18e), p. 404] Fit a straight line trend to the following time series data:
Year 2010 2011 2012 2013 2014
Sales of sugar 80 90 92 83 94
Eliminate the trend from the series. What components are left over? [ y=87.8+2.1 x ]

Problem-23 [BBS 3rd year 2006] Fit a trend line by the method of least squares to the following data:
Year: 2000 2001 2002 2003 2004 2005 2006 2007
Sales (in Tk. lac): 38 40 65 72 69 60 87 95
Plot the given data on a graph paper. Showing also the trend line. Estimate the sales for the year 2008.
Ans. Y = 65.75 + 3.67X, estimated trend- 40.06, 47.40, 54.74, 62.08, 67.42, 76.76, 84.10, 91.44. Estimated Sales 2008 =
98.78.

Problem-24 [BBS 3rd year 2009] Using least square method draw a line from the following information.
Year 1992 1993 1994 1995 1996 1997 1998 1999 2000
Production 102.3 101.9 105.8 112.0 114.8 118.7 124.5 129.9 134.8
Ans. Y = 116.08 + 4.30X, estimated trend- 98.88, 103.18, 107.48, 111.78, 116.08, 120.38, 124.68, 128.98, 133.28.

Problem-25 [BBA (Prof) 2011] The following are annual profits (in thousands of taka) in a business firm: -
Years: 2001 2002 2003 2004 2005 2006 2007
Profit (in ‘000Tk.) 60 72 75 65 80 85 95
(i) Use the method of least squares to fit a straight line to the above data;
(ii) Plot the above figures and draw the line;
(iii) Also make an estimate of the profits for the year 2010.

Ans. Y = 76 + 4.86X, estimated trend- 61.42, 66.28, 71.14, 76, 80.86, 85.72, 90.58. Estimated profit 2010 = 105.16
112 Chapter  8 : Time Series

Problem-26 [BBA (Prof) 2010] You are given below the figures of production (in thousand tones) of a sugar
mill: -
Year 2003 2004 2005 2006 2007 2008 2009
Production 70 75 90 91 95 98 100
(i) Use the method of least squares to fit a straight line to the above data.
(ii) Estimate likely production for 2012
(iii) Plot the above figures and draw the line.

Ans. Y = 88.43 + 5.04X, estimated trend- 73.22, 78.29, 83.36, 88.43, 93.50, 98.57, 103.64. Estimated profit 2012 =
118.67

Problem-27 [BBS 3rd year 2008; same as Gupta & Gupta (18e), p. 404] Below are given figures of
production (in thousand quintals) of a sugar factory.

Years: 1999 2000 2001 2002 2003 2004 2005

Production (Thousand quintal): 77 88 94 85 91 98 90

(i) Fit a straight line by the ‘least squares’ method, and calculate the trend values.
(ii) Eliminate the trend. What components of the time series are thus left over?
(iii) What is the monthly increase in the production of sugar?
 Business Statistics 113

Required – (i):
Table for calculation Trend by the method of Least Squares
Production Deviation from 2
Year
(y) mid year (x)
xy x
1999 77 -3 - 231 9
2000 88 -2 - 176 4
2001 94 -1 - 94 1
2002 85 0 0 0
2003 91 1 91 1
2004 98 2 196 4
2005 90 3 270 9
N=7 ∑ y=623 ∑ xy =56 ∑ x 2=28
Calculation of straight line trend by the method of least square:
The equation of the straight line trend is Y = a + bX

∑ y = 623 =89. b=
∑ xy = 56 =2
a=
N 7 ∑ x 2 28
 Y = 89 + 2X

Calculation of trend value

Y 1999 89 + 2X = 89 + 2 × (3) = 83
Y 2000 89 + 2X = 89 + 2 × (2) = 85
Y 2001 89 + 2X = 89 + 2 × (1) = 87
Y 2002 89 + 2X = 89 + 2 × 0 = 89
Y 2003 89 + 2X = 89 + 2 × 1 = 91
Y 2004 89 + 2X = 89 + 2 × 2 = 93
Y 2005 89 + 2X = 89 + 2 × 3 = 95

Required – (ii):
Original Value
Calculation of eliminating the trend: Y e = ×100
Trend Value
85 90
Y e = × 100=95.51 Y e= × 100=94.74
77 89 95
Y e= × 100=92.77
83
88 Y e =91 ×100=100
Y e = × 100=103.53
85
98 98
Y e = × 100=108.05 Y e= × 100=105.38
87 93
So, after eliminating the trend we are left with Seasonal variation, cyclical variations and Irregular variations.
114 Chapter  8 : Time Series

Required – (iii): Calculation of monthly increase in the production of sugar:

b 2
Monthly increase in the production of sugar ¿ = =0.17
12 12

Problem-28 Below are given figures of production (in thousand tones) of a sugar mill:

Year 2007 2008 2009 2010 2011 2012 2013 2014

Production 72 77 90 98 96 99 102 110

(i) Fit a straight line by the least square method and tabulate the trend value.
(ii) Make the data trend free and indicate what components of time series are left.
(iii) What is the monthly increase in the production of sugar?

Problem-29 [Gupta & Gupta (18e), p. 404] Below are given figures of production (in million tones) of a
cement factory:

Year 2005 2006 2007 2008 2009 2010 2011 2012

Production 72 77 90 98 96 99 102 110

(i) Fit a straight line by the least square method and tabulate the trend value.
(ii) Make the data trend free and indicate what components of time series are left.
(iii) What is the monthly increase in the production of sugar?
[Y = 93 + 2.48X; trend value 75.64, 80.60, 85.56, 90.52, 95.48, 100.44, 105.40, 110.36; monthly increase 0.41.]