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2021 Statistics Fin 13
2021 Statistics Fin 13
Lecture 13
2021
time series analysis
Index Number
a number that measures the relative (percentage) change
(describe by how many percent the level of the phenomenon has increased/ decreased):
• in the level of a phenomenon - change in price, quantity, value or some other item of interest
USEFUL IN MANY OTHER AREAS OF BUSINESS AND ECONOMICS - consumer price index (CPI)
- Dow Jones
- Stock Exchange (NYSE) Index
HELPFUL IN PREDICTIONS
index numbers
• Index numbers must always be related to some time period - base time period
• Current period = the period for which you wish to find the index numer (denoted by 1 or t)
• Base period = the period with which you wish to compare prices in the current period (denoted by 0)
• The choice of the base period should be considered very carefully - often depends on economic factors
• It should be a ‘normal’ period with respect to the relevant index
• It should not be chosen too far in the past
• Base period index = 100% (or 1) by definition
• Simple index numer - measures the percentage change in one or more than one variable
• Composite index numer - measures the percentage change of a group of items (not one item)
- index number obtained by combining the information from a set of economic commodities
time series analysis
Simple index numer - measures the relative change in one variable / a single distinct commodity
Index
Number of Chain Index
where (base year =
Year Orders number
2018)
Iy = index number of commodity ‘y’ 2013 272 272/320=0.85 -
yt = value of commodity ‘y’ at time t 2014 288 288/320=0.90 1.06
y0 = value of commodity ‘y’ in the base period 2015 295 0.92 1.02
2016 311 0.97 1.05
2017 322 1.01 1.04
2018 320 1.00 0.99
2019 348 1.09 1.09
2020 366 1.14 1.05
2021 384 1.20 1.05
time series analysis
changes of indexes
1. converting the Fixed Base Index Number to Chain Base Index Number
2. changing the base of fixed base index number
3. converting the Chain Base Index Number to Fixed Base Index Number
time series analysis
changes of indexes
1. converting the Fixed Base Index Number to Chain Base Index Number
changes of indexes
1. converting the Fixed Base Index Number to Chain Base Index Number
changes of indexes
1. converting the Fixed Base Index Number to Chain Base Index Number
2. changing the base of fixed base index number
changes of indexes
1. converting the Fixed Base Index Number to Chain Base Index Number
2. changing the base of fixed base index number
3. converting the Chain Base Index Number to Fixed Base Index Number
Indeksy Indeksy
Fixed base relative
Year
Lata Chain relative
łańcuchowe jednopodstawowe
2014=1
2014 = 1
0,89 =
2010 - 0,95 0,93
0,87 =
2011 0,95 0,98 0,89
0,96 =
2012 0,98 1,10 0,87
2013 1,1 1 = 0,96
1,04
2014 1,04 1
2015 1,06 1 1,06 = 1,06
2016 1,02 1,06 1,02 = 1,08
2017 1,05 1,08 1,05 = 1,13
time series analysis
Example:
The population of the Canadian province of British Columbia in 2013 was
4,494,232 and for Ontario it was 13,069,182.
What is the population of British Columbia compared to Ontario?
p0 2015
2016
48.66
43.29
96
85
2017 50.80 100
2018 65.23 128
2019 56.99 112
2020 39.68 78
2021 68.17 134
pt - price at time t 2022 83.13 164
p0 - price in the base period If the simple price index is more than 100
subtract 100 from the simple price index.
The result is the percentage increase in price
from the base period to the current period
q0 2015
2016
9441
8844
172
161
2017 9357 171
2018 10941 200
2019 12289 224
2020 11283 206
Paasche index
Ip =
P p1q1 A Paasche price index uses current
time period quantities as weights P
Iq = q1 p1
p0q1 q0 p1
It measures the change in the cost of purchasing items, in
terms of quantities relating to the current period
Fisher index
F
Ip = L P
IpIp
F
Iq = L P
Iq Iq
Example
Given below are the price quantity data, with price quoted in PLN per kg and
production in qtls.
Find:
(1) Laspeyre’s Index
(2) Paasche’s Index
(3) Fisher Ideal Index.
2012 2017
ITEMS PRICE PRODUCTION PRICE PRODUCTION
( p1q0 ) ( p0 q0 ) ( p q ) ( p0 q1 )
ITEMS PRICE PRODUCTION PRICE PRODUCTION
( p0 ) (q0 ) ( p1 ) (q1 ) 1 1
p q 0
p q0
100 0
28020
1
31520
Comparison of the Laspeyres and Paasche indexes
– The Laspeyres index measures the ratio of expenditures on base year quantities
in the current year to expenditures on those quantities in the base year
– The Paasche index measures the ratio of expenditures on current year quantities
in the current year to expenditures on those quantities in the base year
– Since the Laspeyres index uses base period weights, it may overestimate the rise in the
cost of living (because people may have reduced their consumption of items that have
become proportionately more expensive than others)
– Since the Paasche index uses current period weights, it may underestimate the rise in
the cost of living
– With the Paasche index it is difficult to make year-to-year comparisons, since every year
a new set of weights is used
– The Paasche index requires that a new set of weights be obtained each year,
and this information can be expensive to obtain
– Because of the last 2 points above, the Laspeyres index is the one most commonly used
Copyright 2010 McGraw-Hill Australia Pty Ltd
PowerPoint slides to accompany Croucher, Introductory Mathematics and Statistics, 5e
time series analysis
• The CPI has been designed as a general measure of price inflation for the
household sector.
• The CPI is simply a measure of the changes in the cost of a basket, as the
prices of items in it change
• the total basket is divided into 230 commodity groups e.g:
– food
– alcohol and tobacco
– clothing and footwear
– housing
– household contents and services
– health
– transportation
– communication
– research
– education
– financial and insurance services
time series analysis
one of the oldest and the most commonly followed equity indices
"Standard & Poor's 500 Index – S&P 500". Investopedia. Archived from the original on June 14, 2012. Retrieved September 15, 2019.