Session 10:

Time Series Analysis

 What would future be like?

Business
Individuals
Societies
Governments
News channels
Even astrologers, who make a living out of it!

Is there an ‘astrology of decision making’?

 Pyramid of statistics

APPLIED

DESCRIPTIVE ANALYTICAL INFERENTIAL INDUCTIVE

 Time Series Analysis - Basics
Time Series Analysis - Basics

• A quantitative forecasting technique, Time

series involves past data indexed by equally
spaced increments of time (minutes, hours, days,
weeks, etc.), which is used to forecast/ predict
Qualitative Quantitative
future data
• Time series analysis accounts for the fact that
Delphi
data points taken over time may have an
Time
Causal
Surveys Series internal structure (such as autocorrelation,
trend or seasonal variation) that should be
Polling
accounted for
Executiv
e
Opinions
 Situation 1 - Moving Average Approach

• A retail company has monthly sales data for 2018, from Jan-Dec. The Sales Head wants to apply a simple, but
statistical technique, taking 3-months rolling data to forecast sales for Jan, 2019 and beyond.
Steps
• Refer to sales data in Excel
• Calculate the simple moving average for 3-month duration
• For a simple moving average, the formula is the sum of the data points over a given period divided by the number of
periods
• Insert a line graph for actual and forecast figures to evaluate the effect of smoothing variations between time-steps
• Alternatively, use data analysis toolpak (preferred)
 Situation 2 –
Weighted Moving Average Approach
Situation 2 –
Weighted Moving Average Approach

• A retail company has monthly sales data for 2018, from Jan-Dec. The Sales Head wants to apply a simple, but
statistical technique, giving higher weightage to recent months in a 3-month rolling format to forecast sales for Jan,
2019 and beyond.
Steps
• Refer to sales data in Excel
• Apply weights in 3:2:1 ratio and calculate the moving average for 3-month duration
• Insert a line graph for actual and forecast figures to evaluate the effect of smoothing variations between time-steps
 Sit
Situation 3 –
uatn 4 –
Exponential Moving Average Approach

• A retail company has monthly sales data for 2018, from Jan-Dec. The Sales Head
wants to apply a simple, but statistical technique, giving accounting for the
dynamic fluctuations in sales data, to forecast sales for Jan, 2019 and beyond.
Steps
• Refer to sales data in Excel
• Follow ‘exponential smoothing’ steps in data analysis toolpak
o The damping factor is the coefficient of exponential smoothing (default is 0.3).
 Situation 4 –
Autocorrelation
Situation 4 – Approach
Autocorrelation Approach

• A retail company has monthly sales data for 2018, from Jan-Dec. The Sales Head
wants to build a predictive model, to forecast sales for Jan, 2019 and beyond.
Steps
• Refer to sales data in Excel
• Create the number of ‘lags’ you want in the autocorrelation model
o We use lags as the independent variable(s), x
o Y, the dependent variable is the predicted value
• To run regression analysis, copy paste data separately without blank rows
• In the regression output, refer to the P-values of the lags
• Exclude the lags whose P-value is > sig. level and rerun the autoregression