A PROBLEM BASED LEARNING PROJECT REPORT

ON

“A study on Modeling Trends And Seasonality”

UNDER THE GUIDANCE OF: -

SHAIFALI AGRAWAL

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE

AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED AT

DEPARTMENT OF BUSINESS
ADMINISTRATION
BUNDELKHAND INSTITUTE OF ENGINEERING
AND TECHNOLOGY JHANSI UTTAR PRADESH

1
 DECLARATION
We undersigned, hereby declared that the project “A Study
On Modeling Trends And Seasonality” submitted in partial
fulfillment for the award of degree of master of business
administration of DR. A PJ ABDUL KALAM TECHNICAL
UNIVERSITY is a bonafide record of work done by me under
the guidance of (SHAIFALI AGRAWAL) (MBA Department)
this problem-based learning project report has not
previously formed the basis for the award of any degree,
diploma or similar title of any university.

Date: - 20 NOV 2022

NAMES OF STUDENTS: -

Kaushambhi Tiwari(2100430700016)

Manish Dwivedi(2100430700021)

Mayank Patel (2100430700023)

Md farhan(2100430700024)
Mohit kumar (2100430700025 )

2
 CERTIFICATE
This is to certify that the problem-based learning project
report title “A Study On Modeling Trends And
Seasonality” being submitted by-

Kaushambhi Tiwari(2100430700016)

Manish Dwivedi(2100430700021)

Mayank Patel (2100430700023)

Md farhan(2100430700024)

Mohit kumar (2100430700025)

In partial fulfillment of the requirement for the award of the

degree of Master of Business Administration, is a bonafide
record of the project work done by MBA 2nd year students
of BIET JHANSI.

Name of guide- SHAIFALI AGRAWAL

3
 ACKNOWLEDGEMENT
We would like to express our special thanks of gratitude
to our professor S HAI FALI AGARWAL who gave us the
golden opportunity to do this wonderful project “.A
Study On Modeling Trends And Seasonality”.

Who also helped us in guiding for our project work by this

we came to know about so many new things we are really
thankful to her Secondly, we would like to thanks our
parents and friends who helped us a lot in finalizing this
problem- based learning project report work within the
limited time period.

4
 INDEX

S.NO TITLE Page No.

1. 6-11

MODELING TREND
2. 11- 14

SEASONALITY
3. 14- 18

How to Make a Good “Trend” and

“Seasonality” Forecasting

4. 18
CONCLUSION
5. 19
BIBLIOGRAPHY

5
 Modeling Trend

Trend forecasting is a complicated but useful way to look at past sales

or market growth, determine possible trends from that data and use
the information to extrapolate what could happen in the future.
Marketing experts typically use trend forecasting to help determine
potential future sales growth. Many areas of a business can use
forecasting, and examining the concept as it relates to sales can help
you gain an understanding of this strategy.

🔴Time Series and Trends: Trend forecasting is quantitative

forecasting, meaning its forecasting is based on tangible, concrete
numbers from the past. It uses time series data, which is data where
the numerical value is known over different points in time. Typically,
this numerical data is plotted on a graph, with the horizontal x-axis
being used to plot time, such as the year, and the y- data being used to
plot the information you are trying to predict, such as sales amounts or
number of people. There are several different types of patterns that
tend to appear on a time-series graph.

6
🔴Constant Patterns in Data: When looking at sales numbers, for
example, a constant trend is seen when there is no net increase or
decrease in sales over time. The sales may increase or decrease at
specific dates, but the overall average stays the same. However, even if
the average results are the same within a year, there still can be
seasonal changes. For example, sales levels may be consistently greater
in the summer and lower in the winter, although the average is the
same in the entire year.

🔴Linear Patterns in Data: A linear pattern is a steady decrease or

increase in numbers over time. On a graph, this appears as a straight
line angled diagonally up or down. If someone looked at sales of VCRs,
for example, they might see a diagonal line angled downward,
Indicating that sales of VCRS are decreasing steadily over time.

🔴Understanding Exponential Patterns: An exponential pattern is

simpler than it may sound. Rather than a slow, steady increase over
time, an exponential pattern indicates that data is rising at an
increasing rate over time. Instead of a straight line pointing diagonally
up, this type of graph shows a curved line where the last point in later
years is higher than the first year, if the rate is increasing. An
exponential trend for sales might indicate that sales were very slow in
early years, but the product has grown increasingly popular each year
as more people become interested in purchasing it.

7
🔴More Complicated Patterns: Trend forecasting can also deal with
patterns that are much more complicated than constant, linear and
exponential graphs. For example, a damped trend may show there was
an overall increase in sales for a number of years and then a sudden
stop. A polynomial trend might show a gradual increase, then
stagnation in sales over time followed by a decrease in sales.

🔴Forecasting Using Patterns: Looking at data over a number of

years and finding patterns, you can use this information to predict
future patterns. A trend means the same series of events is happening
over and over. For example, if there is a trend of constant sales each
year with a decrease of sales in winter that is offset by an increase in
the summer, a person might use this pattern to predict that sales will
continue to be low in the winter. Put into action, a store manager might
I offer additional products in the winter to help hedge against the
expected drop in sales. However, forecasting isn't done quickly by just
looking at a graph. Forecasters may translate the a graph's patterns into
a formula to accurately predict what will happen in the future. They
often use spreadsheet software that comes with built-in trend
forecasting tools.

🔴 Trend Forecasting with Caution: Trend forecasting is scientific, but it

is also uncertain. The longer into the future a forecast is applied, the
more uncertain the results become. Unexpected events can happen
that will disrupt a steady pattern, like stock market downturns changing
consumer behavior and dramatic shifts in users' access to certain
technologies. The more complicated a pattern appears to be, the more
uncertain a trend forecast is.

EXAMPLE LinkedIn Members

8
LinkedIn is the largest professional networking service. Unlike
Facebook, LinkedIn is a business-oriented social network allowing its
members to place online resumes and to connect with other members
for career opportunities. Shows the number of LinkedIn members (in
millions) by quarter starting from the first quarter of 2009 and ending
with the second quarter of 2014.

The number of members are clearly increasing with time. However, the
trend appears not to be linear. Created using Excel’s trendline option
with charts, shows a linear trend fit to the LinkedIn series. It is clear
that the linear trend model fit is systematically off. The linear model is
not able to capture the curvature in the series. One possible approach
to fitting curved trends is to introduce the square of the time index to
the model:

ŷt=b0+b1t+b2t2

Time series plot of number of LinkedIn members by quarter (first

quarter 2009 through second quarter 2014).

Linear trend fit for the LinkedIn series.

9
 Su
ch a fitted model is known as a quadratic trend model. Shows the best-
fitting quadratic trend model. In comparison to the linear trend model,
the quadratic trend model fits the data series remarkably well.

Quadratic trend fit for the LinkedIn series.

10
 Seasonality
Seasonality is a characteristic of a time series in which the data
experiences regular and predictable changes that recur every calendar
year. Any predictable fluctuation or pattern that recurs or repeats over
a one- year period is said to be seasonal.

Seasonal effects are different from cyclical effects, as seasonal cycles

are observed within one calendar year, while cyclical effects, such as
boosted sales due to low unemployment rates, can span time periods
shorter or longer than one calendar year.

11
 Seasonality Types: There are three common seasonality types:
yearly, monthly and weekly.

(i) Yearly seasonality: Yearly seasonality encompasses predictable

changes in demand month over month and are consistent on an annual
basis. For example, the purchase of swimsuits and sunscreen prior to
the summer months and notebooks and pens leading up to the new
school year.

(ii) Monthly seasonality: Monthly seasonality covers variations in

demand over the course of a month, like the purchasing of items
biweekly when paychecks come in or at the end of the month when
there's extra money in the budget.

(iii) Weekly seasonality: Weekly seasonality is a characteristic of more

general product consumption and reflects a host of variables. You may
find that consumers buy more (or less) of different products on
different days of the week.

Challenges in estimating seasonality indices:

The seasonality model illustrated here above is a rather naive approach
that work for long smooth seasonal time-series. Yet, there are multiple
practical difficulties when estimating seasonality:

🔴 Time-series are short. The lifespan of most consumer goods do not

exceed 3 or 4 years. As a result, for a given product, sales history offers
on average very few points in the past to estimate each seasonal index
(that is to say the values of S(t) during the course of the year, cf. the
previous section).

12
🔴 Time-series are noisy. Random market fluctuations impact the sales,
and make the seasonality more difficult to isolate.

🔴Multiple seasonalities involved. When looking at sales at the store

level, the seasonality of the product itself is typically entangled with the
seasonality of the store .

🔴Other patterns such as trend or product lifecycle also impact time-

series, introducing various sort of bias in the estimation.

Example LinkedIn members. Refer to the quadratic fit shown in above

figure for the number of LinkedIn members by quarter. The series
ended on the second quarter of 2014. Provide a forecast for the
number of members for the third and fourth quarters of 2014.

Seasonal patterns:
Variables of economic interest are often tied to other events that
repeat with regular frequency over time. Agriculture-related variables
will vary with the growing and harvesting seasons. Sales data may be
linked to events like regular changes in the weather, the start of the
school year, and the celebration of certain holidays. As a result, we find
a repeating pattern in the data series that relates to a particular
“season,” such as month of the year, day of the week, or hour of the
day. In the applications to follow, we see that to improve the accuracy
of our forecasts, we need to account for seasonal variation in the time
series.

How to Make a Good “Trend” and “Seasonality” Forecasting

13
Discussing time series forecasting, there are three types of time series
patterns: trend, seasonal, and cyclic. In this case, we just discuss the
trend and seasonal patterns. A trend pattern exists when there is a
long-term decrease or increase in the time series. The trend can be
linear or non-linear, such as an exponential function. In another hand,
seasonal pattern exists when the data is influenced by seasonal factors,
such as a day of the week, a month, or two-quarter of the year. In other
words, a seasonal pattern exists of a fixed known period.

Regression
Based on what we’ve discussed before, regression is one of the main
tasks in supervised machine learning. You need some input and your
target variable is a single floating-point number. For example,
predicting the world gold price. A big difference between regression
and classification is its targets. The targets in regression are just a few
infinite ones, while you have finite possible targets for classification.

Elastic Net vs Extra Trees Regression

Elastic Net Regression first emerged as a result of critique on the lasso
regression, whose variable selection can be too dependenton data and
thus unstable. The solution is to combine the penalties of ridge
regression and lasso regression to get the best of both. For further
explanation, you can read it on web.standford.edu. In this case, we use
the international airline passenger’s history from 1949 to 1960 as the
data set (80% as data train and 20% as data test).

14
Extra Trees Regression also known as Extremely Randomized Trees is a
meta estimator that fits several randomized decision trees on various
sub-samples of the data set and uses averaging to control over-fitting
and improve the predictive accuracy.

15
Seeing the two above modeling, we can decide to have two models:
One which predicts the trend (Figure 1) and another one which predicts
seasonality effects (Figure 2). Based on the two models above, can we
have a good “trend” and “seasonality” forecasting? The answer you can
find in the following section.

Combining The Models

To make a good “trend” and “seasonality” forecasting, we can combine
Elastic Net Regression with Extra Trees Regression. The following are
the steps to combine it.

1. Assume we have a function f(x):

f(x) = f1(x) + f2(x)

16
where f1(x) is Elastic Net Regression Function and f2(x) is Extra Trees
Regression Function.

2. Fit f1(x) on the training data set, where f1(x) has to predict the global
trend and thus solve the extrapolation problem.

3. Transform the training data set (x, y):

y′ = y − f1(x)

4. Fit f2(x) on (x, y′). So f2(x) has to solve an interpolation problem.

Plotting the prediction is crucial for extrapolation. What we can see in

the above image (Figure 3) is that there are two things to match: A

17
global trend and local seasonality-effects. Below, you can see a list of
scoring functions by using MAE.

Con
clusion
MAE tells us how many the airline passengers prediction is typically
away from the true value. The small MAE value means good prediction
and vice versa. Please note that the high MAE value here do not mean
the regression model is bad. Some might be better when use more data
set, some might be better suited to different regression problems, e.g.
extrapolation instead of interpolation or working with higher
dimensional data. Thank you for reading this article and have a nice
weekend :)

BIBLIOGRAPHY :-

18
Modeling Trend https://theintactone.com/2020/01/18/modeling-
trend/

https://digfir-published.macmillanusa.com/psbe4e/
psbe4e_ch13_8.html

Seasonality https://theintactone.com/2020/01/18/seasonality/

https://medium.com/it-paragon/how-to-make-good-trend-and-
seasonality-forecasting-a163379d613f

19