Deck 16: Time-Series Forecasting

Question 1

After estimating a trend model for annual time-series data, you obtain the following residual plot against time, the problem with your model is that:

A) The cyclical component has not been accounted for.
B) The seasonal component has not been accounted for.
C) The trend component has not been accounted for.
D) The irregular component has not been accounted for.

Answer 1

A

Question 2

If a time series does not exhibit a long-term trend, the method of exponential
smoothing may be used to obtain short-term predictions about the future.

Answer 2

True

Question 3

Which of the following is not an advantage of exponential smoothing?

A) It enables you to perform one-period ahead forecasting.
B) It enables you to perform more than one-period ahead forecasting.
C) It enables you to smooth out seasonal components.
D) It enables you to smooth out cyclical components.

Answer 3

B

Question 4

Given a data set with 15 yearly observations, a 3-year moving average will
have fewer observations than a 5-year moving average.

Question 5

Given a data set with 15 yearly observations, there are only seven 9-year
moving averages.

Question 6

When using the exponentially weighted moving average for purposes of forecasting rather than smoothing,

A) the previous smoothed value becomes the forecast.
B) the current smoothed value becomes the forecast.
C) the next smoothed value becomes the forecast.
D) None of the above.

Question 7

The method of moving averages is used

A) to plot a series.
B) to exponentiate a series.
C) to smooth a series.
D) in regression analysis.

Question 8

Based on the following scatter plot, which of the time-series components is not present in this quarterly time series?

A) Trend
B) Seasonal
C) Cyclical
D) Irregular

Question 9

A model that can be used to make predictions about long-term future values of a time series is

A) linear trend.
B) quadratic trend.
C) exponential trend.
D) All of the above.

Question 10

A trend is a persistent pattern in annual time-series data that has to be followed
for several years.

Question 11

The effect of an unpredictable, rare event will be contained in the ___________ component.

A) trend
B) cyclical
C) irregular
D) seasonal

Question 12

The annual multiplicative time-series model does not possess _______ component.

A) a trend
B) a cyclical
C) an irregular
D) a seasonal

Question 13

The overall upward or downward pattern of the data in an annual time series will be contained in the ____________ component.

A) trend
B) cyclical
C) irregular
D) seasonal

Question 14

When a time series appears to be increasing at an increasing rate, such that percentage difference from value to value is constant, the appropriate model to fit is the

A) linear trend.
B) quadratic trend.
C) exponential trend.
D) None of the above.

Question 15

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.

Question 16

The fairly regular fluctuations that occur within each year would be contained in the _________________ component.

A) trend
B) cyclical
C) irregular
D) seasonal

Question 17

Which of the following methods should not be used for short-term forecasts into the future?

A) Exponential smoothing
B) Moving averages
C) Linear trend model
D) Autoregressive modeling

Question 18

You need to decide whether you should invest in a particular stock. You would like to invest if the price is likely to rise in the long run. You have data on the daily mean price of this
Stock over the past 12 months. Your best action is to

A) compute moving averages
B) perform exponential smoothing
C) estimate a least square trend model
D) compute the MAD statistic

Question 19

Given a data set with 15 yearly observations, there are only thirteen 3-year
moving averages.

Question 20

Which of the following statements about moving averages is not true?

A) It can be used to smooth a series.
B) It gives equal weight to all values in the computation.
C) It is simpler than the method of exponential smoothing.
D) It gives greater weight to more recent data.

Question 21

In selecting a forecasting model, you should perform a residual analysis.

Question 22

SCENARIO 16-1
The number of cases of chardonnay wine sold by a Paso Robles winery in an 8-year period
follows. $$\begin{array} { c c } \text { Year } & \text { Cases of Wine } \\\hline 2006 & 270 \\2007 & 356 \\2008 & 398 \\2009 & 456 \\2010 & 438 \\2011 & 478 \\2012 & 460 \\2013 & 480\end{array}$$

-Referring to Scenario 16-1, does there appear to be a relationship between year and the number of cases of wine sold?

A) No, there appears to be no relationship between the year and the number of cases of wine sold by the vintner.
B) Yes, there appears to be a slight negative linear relationship between the year and the number of cases of wine sold by the vintner.
C) Yes, there appears to be a slight positive relationship between the year and the number of cases of wine sold by the vintner.
D) Yes, there appears to be a negative nonlinear relationship between the year and the number of cases of wine sold by the vintner.

Question 23

To assess the adequacy of a forecasting model, one measure that is often used is

A) quadratic trend analysis.
B) the MAD.
C) exponential smoothing.
D) moving averages.

Question 24

After estimating a trend model for annual time-series data, you obtain the following residual plot against time, the problem with your model is that

A) the cyclical component has not been accounted for.
B) the seasonal component has not been accounted for.
C) the trend component has not been accounted for.
D) the irregular component has not been accounted for.

Question 25

MAD is the summation of the residuals divided by the sample size.

Question 26

A second-order autoregressive model for average mortgage rate is: .
If the average mortgage rate in 2012 was 7.0, and in 2011 was 6.4, the forecast for 2013 is
__________.

Question 27

The method of least squares is used on time-series data for

A) eliminating irregular movements.
B) deseasonalizing the data.
C) obtaining the trend equation.
D) exponentially smoothing a series.

Question 28

Which of the following terms describes the overall long-term tendency of a time series?

A) Trend
B) Cyclical component
C) Irregular component
D) Seasonal component

Question 29

In selecting an appropriate forecasting model, the following approaches are suggested:

A) Perform a residual analysis.
B) Measure the size of the forecasting error.
C) Use the principle of parsimony.
D) All of the above.

Question 30

A first-order autoregressive model for stock sales is: .
If sales in 2012 is 6,000, the forecast of sales for 2013 is __________.

Question 31

The cyclical component of a time series

A) represents periodic fluctuations which reoccur within 1 year.
B) represents periodic fluctuations which usually occur in 2 or more years.
C) is obtained by adjusting for the seasonal variation.
D) is obtained by adjusting for calendar variation.

Question 32

SCENARIO 16-1
The number of cases of chardonnay wine sold by a Paso Robles winery in an 8-year period
follows.
Referring to Scenario 16-1, set up a scatter diagram (i.e., a time-series plot) with year on the
horizontal X-axis.

Question 33

A second-order autoregressive model for average mortgage rate is: .
If the average mortgage rate in 2012 was 7.0, and in 2011 was 6.4, the forecast for 2014 is
__________.

Question 34

The principle of parsimony indicates that the simplest model that gets the job
done adequately should be used.

Question 35

A least squares linear trend line is just a simple regression line with the years
recoded.

Question 36

The method of least squares may be used to estimate both linear and
curvilinear trends.

Question 37

The manager of a company believed that her company's profits were following an exponential
trend. She used Microsoft Excel to obtain a prediction equation for the logarithm (base 10) of
profits: The data she used were from 2007 through 2012 coded 0 to 5. The forecast for 2013 profits is
__________.

Question 38

Each forecast using the method of exponential smoothing depends on all the
previous observations in the time series.

Question 39

Microsoft Excel was used to obtain the following quadratic trend equation: .
The data used was from 2004 through 2013 coded 0 to 9. The forecast for 2014 is
__________.

Question 40

The MAD is a measure of the mean of the absolute discrepancies between the
actual and the fitted values in a given time series.

Question 41

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, if a three-month moving average is used to smooth this series, how many values would it have?

A) 2
B) 3
C) 4
D) 5

Question 42

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, if a three-month moving average is used to smooth this series, what would be the last calculated value?

A) 72
B) 93
C) 114
D) 126

Question 43

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, if this series is smoothed using exponential smoothing with a smoothing constant of 1/3, what would be the third value?

A) 53
B) 65.33
C) 68
D) 81

Question 44

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, if this series is smoothed using exponential smoothing with a smoothing constant of 1/3, what would be the second value?

A) 39
B) 42
C) 45
D) 53

Question 45

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, suppose the last two smoothed values are 81 and 96 (Note: they are not). What would you forecast as the value of the time series for July?

A) 81
B) 86
C) 91
D) 96

Question 46

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, if this series is smoothed using exponential smoothing with a smoothing constant of 1/3, how many values would it have?

A) 3
B) 4
C) 5
D) 6

Question 47

SCENARIO 16-2
The monthly advertising expenditures of a department store chain (in $1,000,000s) were collected
over the last decade. The last 14 months of this time series follows: $$\begin{array} { c l } \text { Month } & \text { Expenditures (\$) } \\\hline 1 & 1.4 \\2 & 1.8 \\3 & 1.6 \\4 & 1.5 \\5 & 1.8 \\6 & 1.7 \\7 & 1.9 \\8 & 2.2 \\9 & 1.9 \\10 & 1.9 \\11 & 2.1 \\12 & 2.4 \\13 & 2.8 \\14 & 3.1\end{array}$$

-Referring to Scenario 16-2, advertising expenditures appear to be increasing
in a linear rather than curvilinear manner over time.

Question 48

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, a centered 3-year moving average is to be constructed for the
wine sales. The moving average for 2006 is __________.

Question 49

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, a centered 3-year moving average is to be constructed for the
wine sales. The result of this process will lead to a total of __________ moving averages.

Question 50

The following is the list of MAD statistics for each of the models you have estimated from time-series data: $$\begin{array} { | l | l | } \hline \text { Model } & \text { MAD } \\\hline \text { Linear Trend } & 1.38 \\\hline \text { Quadratic Trend } & 1.22 \\\hline \text { Exponential Trend } & 1.39 \\\hline \text { Second-order Autoregressive } & 0.71 \\\hline\end{array}$$ Based on the MAD criterion, the most appropriate model is

A) linear trend.
B) quadratic trend.
C) exponential trend.
D) second-order autoregressive.

Question 51

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
If you want to recover the trend using exponential smoothing, you will choose a weight (W) that falls in the range

A) [0, 0.2]
B) [0.2,0.4]
C) [0.6,0.8]
D) [0.8,1.0]

Question 52

Which of the following terms describes the up and down movements of a time series that vary both in length and intensity?

A) Trend
B) Cyclical component
C) Irregular component
D) Seasonal component

Question 53

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, a centered 5-year moving average is to be constructed for the
wine sales. The moving average for 2007 is __________.

Question 54

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, if this series is smoothed using exponential smoothing with a smoothing constant of 1/3, what would be the first value?

A) 36
B) 39
C) 42
D) 45

Question 55

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, a centered 3-year moving average is to be constructed for the
wine sales. The moving average for 2009 is __________.

Question 56

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, a centered 5-year moving average is to be constructed for the
wine sales. The number of moving averages that will be calculated is __________.

Question 57

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, construct a centered 3-year moving average for the wine sales.

Question 58

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, suppose the last two smoothed values are 81 and 96 (Note: they are not). What would you forecast as the value of the time series for September?

A) 81
B) 86
C) 91
D) 96

Question 59

SCENARIO 16-2
The monthly advertising expenditures of a department store chain (in $1,000,000s) were collected
over the last decade. The last 14 months of this time series follows:
Referring to Scenario 16-2, set up a scatter plot (i.e., time-series plot) with months on the
horizontal X-axis.

Question 60

SCENARIO 16-3
The following table contains the number of complaints received in a department store for the first
6 months of last year.
Month Complaints
January 36
February 45
March 81
April 90
May 108
June 144
Referring to Scenario 16-3, if a three-month moving average is used to smooth this series, what would be the second calculated value?

A) 36
B) 40.5
C) 54
D) 72

Question 61

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponentially smooth the wine sales with a weight or smoothing
constant of 0.2.

Question 62

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, exponentially smooth the number of arrivals using a smoothing
constant of 0.1.

Question 63

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, a centered 5-year moving average is to be constructed for the
wine sales. The moving average for 2010 is __________.

Question 64

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be smoothed with a 3-term moving
average. The first smoothed value will be __________.

Question 65

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponential smoothing with a weight or smoothing constant of
0.2 will be used to smooth the wine sales. The value of E4, the smoothed value for 2008 is
__________.

Question 66

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponentially smooth the wine sales with a weight or smoothing
constant of 0.4.

Question 67

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponential smoothing with a weight or smoothing constant of
0.4 will be used to smooth the wine sales. The value of E2, the smoothed value for 2006 is
__________.

Question 68

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponential smoothing with a weight or smoothing constant of
0.2 will be used to smooth the wine sales. The value of E2, the smoothed value for 2006 is
__________.

Question 69

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be exponentially smoothed with a
smoothing constant of 0.1. The smoothed value for the sixth Monday will be __________.

Question 70

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be smoothed with a 3-term moving
average. The last smoothed value will be __________.

Question 71

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be exponentially smoothed with a
smoothing constant of 0.1. The smoothed value for the second Monday will be __________.

Question 72

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be smoothed with a 5-term moving
average. The first smoothed value will be __________.

Question 73

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponential smoothing with a weight or smoothing constant of
0.4 will be used to forecast wine sales. The forecast for 2013 is __________.

Question 74

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be smoothed with a 3-term moving
average. There will be a total of __________ smoothed values.

Question 75

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be smoothed with a 5-term moving
average. The last smoothed value will be __________.

Question 76

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be exponentially smoothed with a
smoothing constant of 0.25. The smoothed value for the second Monday will be __________.

Question 77

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponential smoothing with a weight or smoothing constant of
0.2 will be used to forecast wine sales. The forecast for 2013 is __________.

Question 78

SCENARIO 16-5
The number of passengers arriving at San Francisco on the Amtrak cross-country express on 6
successive Mondays were: 60, 72, 96, 84, 36, and 48.
Referring to Scenario 16-5, the number of arrivals will be exponentially smoothed with a
smoothing constant of 0.1. Then the forecast for the seventh Monday will be __________.

Question 79

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, exponential smoothing with a weight or smoothing constant of
0.4 will be used to smooth the wine sales. The value of E5, the smoothed value for 2009 is
__________.

Question 80

SCENARIO 16-4
The number of cases of merlot wine sold by a Paso Robles winery in an 8-year period follows.
Referring to Scenario 16-4, construct a centered 5-year moving average for the wine sales.