Essentials of Business Analytics 1st Edition by Jeffrey Camm,James Cochran,Michael Fry,Jeffrey Ohlmann ,David Anderson

Exercise 8

Consider the following time series data:

a. Construct a time series plot. What type of pattern exists in the data
b. Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 5 1 if quarter 1, 0 otherwise; Qtr2 5 1 if quarter 2, 0 otherwise; Qtr3 5 1 if quarter 3, 0 otherwise.
c. Compute the quarterly forecasts for next year based on the model you developed in part b.
d. Use a multiple regression model to develop an equation to account for trend and seasonal effects in the data. Use the dummy variables you developed in part b to capture seasonal effects and create a variable t such that t 5 1 for quarter 1 in year 1, t 5 2 for quarter 2 in year 1, … t 5 12 for quarter 4 in year 3.
e. Compute the quarterly forecasts for next year based on the model you developed in part d.
f. Is the model you developed in part b or the model you developed in part d more effective Justify your answer.