Business Forecasting · Exercise 1

Class: ___________ Student No: ____________________________ Student Name: ______________

一、 Multiple choices. 请在每道题中选择一个正确答案：

1、 The first step in time-series analysis is to （ ）
A) perform preliminary regression calculations.
B) calculate a moving average.
C) plot the data on a graph.
D) identify relevant correlated variables.

2、 Which of the following is Not an example of time series problem? （ ）

1. Estimating the number of hotel rooms booked in the next 6 months.
2. Estimating effects of climate change on heat-related deaths.
3. Estimating the total sales in the next 3 years of an insurance company.
4. Estimating the number of calls for the next one week.
A) Only 1 B) Only 2 C) Only 3 D) 1 and 3 E) 1, 2 and 3

3、 Which of the following can’t be a component for a time series plot? （ ）

A) Seasonality B) Trend C) Cyclical D) Noise E) None of the above

4、 The below time series plot contains both Trend and Seasonality component. （ ）

A) True B) False

5、 Measures of forecast accuracy based upon a quadratic error cost function, notably root mean square error
(RMSE), tend to treat （ ）
A) levels of large and small forecast errors equally.
B) large and small forecast errors unequally.
C) every forecast error with the same penalty.
D) None of the above.

6、 Which of the following measures is a poor indicator of forecast accuracy, but useful in determining the direction
of bias in a forecasting model? （ ）
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 A) Mean Absolute Percentage Error.
B) Mean Percentage Error.
C) Mean Squared Error.
D) Root Mean Squared Error.
E) None of the above.

7、 The last period’s forecast was 70 and demand was 60. What is the simple exponential smoothing forecast
with alpha of 0.4 for the next period? （ ）
A) 63.8 B) 65 C) 62 D) 66

8、 What does autocorrelation measure? （ ）

A) Linear dependence between multiple points on the different series observed at different times
B) Quadratic dependence between two points on the same series observed at different times
C) Linear dependence between two points on different series observed at same time
D) Linear dependence between two points on the same series observed at different times

9、 Which of the following statements about the method of exponential smoothing is Not true? （ ）
A) it gives greater weight to more recent data
B) it can be used for forecasting
C) it uses all earlier observations in each smoothing calculation
D) it gives greater weight to the earlier observations in the series

10、Which of the following indicates that the time series under study has a seasonal pattern based on 12
months？ （ ）
A) Significant autocorrelation coefficients appear at time lag 1 and 2.
B) Significant autocorrelation coefficients appear at time lag 12 and 24.
C) Significant autocorrelation coefficients appear at time lag 4 and 8.
D) All autocorrelation coefficients are not significant and close to Zero.

11、If there are frequent fundamental changes in the time series under study, and your current moving average
model can’t catch up with these changes, which of the following you would like to try? （ ）
A) Use a smaller k.
B) Use a bigger k.
C) Use zero for k.
D) Do not change k.

12、If the 10 latest forecasting percentage errors are 10%, 5%, 7%, 8%, 5%, -1%, 4%, 6%, 4%, 6%, what is
likely to happen? （ ）
a) The current forecasting model is unbiased.
b) The current forecasting model overestimates the actual value.
c) The current forecasting model underestimates the actual value.
d) None of the above.

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13、Which of the following forecasting models is suitable for the following time series? （ ）

a) Simple average method.

b) Holt’s method.
c) Additive Winter’s method.
d) Multiplicative Winter’s method.

14、When using quarterly data to forecast domestic car sales, how can the simple naive forecasting model be
amended to model seasonal behavior of new car sales, i.e., patterns of sales that arise at the same time
every year? （ ）
A) Forecast next period's sales based on this period's sales.
B) Forecast next period's sales based on last period's sales.
C) Forecast next period’s sales based on the average sales over the current and last three quarters.
D) Forecast next period's sales based on sales four quarters ago.

15、First differencing in time series can help to eliminate which trend?

A) Quadratic Trend
B) Linear Trend
C) Both A & B
D) None of the above

16、Since a ski resort does most of its business in the winter, what is the major source of variation in its income
due to? （ ）
A) Long-term trend
B) Seasonal variation
C) Cyclical effect
D) Episodic effects

17、When a constant decreasing rate (percentage change) is observed in the time series under study, how will
its time series plot look? （ ）
A) Straight line B) Linear C) Curvilinear D) Both "A" and "B" are correct
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 18、If a quarterly seasonal index is 0.56, it implies that （ ）
A) the quarter's sales are 56% above the yearly average.
B) the quarter's sales are 56% of the year total sales.
C) the other three quarter percentages will total 44%.
D) the quarter's sales are 56% of the yearly average.

19、 The summed total of the four typical quarterly indexes in an additive model should equal （ ）.
A) 0
B) 1
C) 4
D) 12

20、Which of the following patterns can be observed from the seasonally adjusted & detrended data? （
）
A) Trend.
B) Seasonality.
C) Cyclic.
D) Growth.

二、 The executive director of Consumer Credit counseling (CCC) wants to estimate the number of new
clients that would be seen in the rest of 1993. The table below gives the number of new clients seen by
CCC for the period January 1985 through March1993.

Number of New Clients Seen by CCC from January 1985 through March 1993
Jan. Feb. Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1985 182 136 99 77 75 63 87 73 83 82 74 75
1986 102 121 128 128 112 122 104 108 97 141 97 87
1987 145 103 113 150 100 131 96 92 88 118 102 98
1988 101 153 138 107 100 115 78 106 94 93 103 104
1989 150 102 151 100 100 98 97 120 98 135 141 67
1990 127 146 175 110 153 117 121 121 131 147 121 110
1991 171 185 172 168 142 152 151 141 128 151 121 126
1992 166 138 175 108 112 147 168 149 145 149 169 138
1993 152 151 199

a. Use the basic naïve model to forecast the number of new clients for January 1993. Calculate the
corresponding residual.

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b. Use a moving average of order 4 to forecast the number of new clients for January 1993. Calculate the
corresponding residual.

c. Use the basic exponential smoothing technique with =0.3 and initial value =182 to forecast the
number of new clients for February and March of 1985, where t=1 refers to January 1985. Calculate the
corresponding residual.

d. The autocorrelation for the residuals from model in c. is plotted below. Do the residual autocorrelations
suggest that exponential smoothing technique works well for these data? Why?

e. Explore and identify the data patterns in this series using the time series plot and the autocorrelation
function as follows.
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f. Develop an additive Winter’s method to better fit the data patterns identified in e.

g. If the MAD, RMSE, and MAPE resulted from model A and B are given in the table as follows, which
model will you prefer? Explain.
model A model B
MAD 20.43 21.43
MAPE 21.67 21.67
RMSE 30.33 28.33

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三、 Decomposition analysis with additive models is used to analyze the time series of Coastal Marine
sales as follows.
a. Please fill in the values for A, B, C and D in the following Minitab output from decomposition.
Coastal TCI Seasonall
t Marine Trend SCI Seasonality y adjusted
时间 去除季节
Sales 趋势 去除趋势 季节影响 detrended
(Million $) 影响 data
1 2000.1 季度(Quarter) 182.7 242.7 -60.0 -55.4 238.1 -4.7
2 2000.2 季度 269.2 A 25.2 -5.5 274.7 30.7
3 2000.3 季度 280.7 245.2 B 35.0 245.7 0.4
4 2000.4 季度 253.0 246.5 6.5 C 227.2 -19.3
5 2001.1 季度 191.1 247.8 -56.7 -55.4 D -1.3
6 2001.2 季度 234.4 249.0 -14.6 -5.5 239.9 E
7 2001.3 季度 285.4 250.3 35.1 35.0 250.4 0.1
8 2001.4 季度 258.7 251.5 7.2 25.8 232.9 -18.6

b. Please download the NEW Coastal Marine sales data from Moodle and use the data through 2005 to
conduct the decomposition analysis with additive models. Report the trend model and seasonal index from
the Minitab output and forecast the sales for the first quarter of 2006.

a. Suppose that Coastal Marine is considering doing some business by polishing fishing vessels to balance
out its seasonal variation, how much sales volume would Coastal Marine have to realize from polishing
vessels to make the 1st quarter of 2006 “average” of the year?