Deck 16: Time Series and Forecasting

Question 1

In the linear trend equation, the letter "b" is the average change in Ŷ for each change of one unit (either increase or decrease) in t.

Answer 1

TRU E

Question 2

The Durbin-Watson statistic is used to test for correlated residuals.

Answer 2

True

Question 3

If the trend equation is Ŷ = 10 + 100t, the forecasted value increases 100 units for the next time period, t.

Answer 3

True

Question 4

In the final step, using the ratio-to-moving-average method, the total of the 12 modified means should theoretically be equal to 1,200 because the average of the 12 months is designated as 100.

Question 5

What two types of irregular variations are unpredictable? ______________________ and _____________________

Question 6

Episodic and residual variations can be projected into the future.

Question 7

Autocorrelation is measured by the trend component of a time series.

Question 8

When estimating the specific seasonals for a monthly time series, the sum of the 12 modified means should theoretically be equal to 1,200 because the average of the 12 specific seasonals is designated as 100.

Question 9

Knowing the seasonal pattern in the form of indexes allows the retailer to deseasonalize sales. This is accomplished by dividing the actual sales for a month by the typical index for that month.

Question 10

If the past data approximates a straight line, the equation used is Ŷ = a + bt, where a is the Y-intercept and b is the slope of the line.

Question 11

The moving average method smoothes out the fluctuations in the data.

Question 12

One component of a time series is cyclical variation. An example of cyclical variation is the business cycle that consists of periods of prosperity followed by periods of recession, depression, and recovery.

Question 13

What method is useful in smoothing out a time series? ______________

Question 14

For a straight trend line, what represents the amount of change in Ŷ for each increase of one unit in t? _________________________

Question 15

If the time series trend is non-linear, a transformation of the data is required.

Question 16

In a linear trend equation, t is a coded value that corresponds with a time period in a time series.

Question 17

How does data that increases by equal percentages over a period of time appear on an arithmetic scaled graph? ___________________

Question 18

What transformation should be used for a time series that increases by equal percentages over time? __________________

Question 19

An analysis of past seasonal fluctuations can be helpful in planning production for items such as toys, dolls, Easter eggs, and other holiday-oriented goods.

Question 20

A typical seasonal index of 103.7 for January indicates that sales for January are below the annual average.

Question 21

A set of typical seasonal indexes is very useful in adjusting a time series for seasonal fluctuations. What is the resulting time series called? _____________________________

Question 22

Autocorrelation occurs when successive residuals are ____.

Question 23

Autocorrelation in a time series can be tested using ____.

Question 24

If a trend equation is Ŷ = 15 + 75t, what is the periodic increase in the forecast? _____

Question 25

To study the trend and cycle components of a time series, typical seasonal indexes are used to compute ____.

Question 26

Autocorrelation can be corrected by using a ________.

Question 27

What type of analysis predicts the future on the basis of past data? ______________________________

Question 28

What is removed from a time series when the data is divided by the seasonal indexes? __

Question 29

In the linear trend equation, what variable represents the Y-intercept? ______

Question 30

To compute a forecast for a time series with seasonality, the trended forecast is computed and then adjusted by multiplying by a ________.

Question 31

For the trend equation, log Ŷ = log (a) + log (b t), the time series is _____.

Question 32

If four seasonal indexes are reported for a time series, how often are data reported? _______________________

Question 33

What method is most commonly used to compute typical seasonal indexes? ___________________________

Question 34

What does a typical sales index of 96 for January indicate about sales? ___________________________________

Question 35

Even if it is zero, every time series has this component. Name it. __________________

Question 36

A useful method for smoothing a time series to examine trend is called a ______.

Question 37

A graph of a deseasonalized time series does NOT show ________.

Question 38

A useful method for eliminating fluctuations in a time series is computing a ______.

Question 39

If we eliminate trend, cyclical and irregular variation from a monthly sales series, what time series component remains? _________________________

Question 40

What method is used to determine the linear equation when the best fitting straight line is required? _____________________

Question 41

A time series is a collection of data that:

A) records past performance
B) records future performance
C) is limited to yearly data
D) is limited to quarterly data

Question 42

For a time series beginning with 1991 and extending up to 2010, which year would be coded with a one when using the coded method?

A) 1989
B) 1991
C) 1992
D) 2001

Question 43

What is the long-term behavior of a variable over an extended period of time called?

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Irregular or erratic variation

Question 44

What is the correct order of events in a typical business cycle?

A) Prosperity, recession, depression and recovery
B) Depression, recovery, recession and prosperity
C) Recovery, depression, prosperity and recession
D) Recession, recovery, prosperity and depression

Question 45

Why are long range predictions considered essential to managing a firm?

A) To develop plans for possible new plants
B) To have raw materials available for future demand
C) To develop plans for future financing
D) All of the above

Question 46

If a major hurricane exerts an impact on the economy, that event could be classified as:

A) Secular trend
B) Episodic variation
C) Residual variation
D) Seasonal variation

Question 47

The following linear trend equation was developed for annual sales from 2005 to 2009, with 2005 as the base year. = 500 + 60t (in $thousands). What are the estimated sales for 2010 (in $thousands)?

A) $500
B) $860
C) $1,040
D) $1,100

Question 48

If the exports (in $millions) for the period 2006 through 2010 were $878, $892, $864, $870 and $912 respectively, what are these values called?

A) Moving average
B) Linear trend equation
C) Logarithmic trend equation
D) Time series data

Question 49

In a time series, high sales in the summer and low sales in the winter is called?

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Variation

Question 50

In a linear trend equation, which variable represents the average change in the dependent variable for every unit change in time?

A) a
B) b
C) t
D) Ŷ

Question 51

In a time series, economic periods of prosperity followed by recession are described as:

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Erratic variation

Question 52

Which one of the following is not a component of a time series?

A) Secular trend
B) Moving average
C) Seasonal variation
D) Irregular variation

Question 53

If the least squares equation for sales data going from 2004 to 2008 is Ŷ = 10 + 1.3t (in $millions), what is the value of t and the forecast for 2010?

A) t = 6, Ŷ = 17.8
B) t = 0, Ŷ = 10.0
C) t = 7, Ŷ = 19.1
D) t = 10, Ŷ = 0.0

Question 54

What is "a" in the least squares trend equation?

A) the intercept
B) the slope
C) the forecast
D) the time period

Question 55

The merchants in Dallas, Texas, suffered flood damage in May 2003. Stores were closed for remodeling nearly two months. What is this type of variation in sales called?

A) Secular trend
B) Seasonal variation
C) Cyclical variation
D) Episodic variation

Question 56

Given the trend equation, Ŷ = 25 + 0.6t (base year = 2006), what would be the forecast value for 2010?

A) 25
B) 28
C) 30
D) 32

Question 57

What is the general equation for the logarithmic trend equation to forecast Ŷ?

A) log a + log b (t)
B) log a t log b (t)
C) a t b(t)
D) ab(t)

Question 58

The following linear trend equation was developed for the annual sales of the Jordan Manufacturing Company. = 500 + 60t (in $thousands). At what rate are sales increasing?

A) $60,000 per year
B) $6,000 per month
C) $500,000 per year
D) $6,000 per year

Question 59

For an annual time series extending from 2000 through 2010, how many years would be lost in a three year moving average?

A) 2 at the start and 1 at the end
B) 1 at the start and 1 at the end
C) 2 at the start and 0 at the end
D) 0 at the start and 2 at the end

Question 60

Since a ski resort does most of its business in the winter, what is the major source of variation that affects sales?

A) Secular trend
B) Seasonal variation
C) Cyclical effect
D) Episodic effects

Question 61

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.

Question 62

For the third quarter, the sales are 1,000 units; the seasonal index for the quarter is 1.10. What are the deseasonalized sales for the quarter?

A) 1,000.
B) 1,100.
C) 909.
D) 0.90.

Question 63

What is the logarithmic transformation for the equation: Ŷ = a + bt?

A) log a = S log Ŷ/n
B) log Ŷ = log a + log b(t)
C) log b = S(X log) Ŷ/t2
D) Ŷ = abt.

Question 64

For the third quarter, the sales are 1,000 units; the seasonal index for the quarter is 0.85. What are the deseasonalized sales for the quarter?

A) 1,176.
B) 1,000.
C) 850.
D) 0.15.

Question 65

To calculate quarterly typical seasonal indexes, how many periods are included in the ratio-to-moving-average method?

A) Two
B) Four
C) Six
D) Twelve

Question 66

The range of possible values for the Durbin-Watson statistic is

A) any value.
B) any value greater than zero.
C) any value from 0 to 4 inclusive.
D) any value less than zero.

Question 67

What time series component was exemplified during the 1980's when the American economy enjoyed a period of prosperity?

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

Question 68

To calculate monthly typical seasonal indexes, a specific seasonal index must be computed for

A) Every month.
B) Every year.
C) Every quarter.
D) Every day.

Question 69

A logarithmic trend equation should be used when the time series trend is:

A) Changing in equal amounts
B) Increasing by equal percentages
C) Increasing in equal amounts
D) Increasing or decreasing by equal percentages

Question 70

What is an advantage of the least squares method for determining a trend line equation?

A) It minimizes the error sum of squares.
B) It is subject to human error.
C) Forecasts have zero error.
D) It is easy to calculate by hand.

Question 71

To calculate monthly typical seasonal indexes, how many periods are included in the ratio-to-moving-average method?

A) Two
B) Four
C) Six
D) Twelve

Question 72

For quarterly seasonal indexes, the total of the adjusted quarterly indexes will equal

A) 4.0.
B) 1.0.
C) 100%
D) a variable.

Question 73

A linear trend equation is used to represent time series values when the data are changing by equal?

A) Percents
B) Proportions
C) Amounts
D) Both "A" and "B" are correct

Question 74

For a five-year moving average, how many values will be lost at the beginning and end of the time series?

A) 0 at the start and 4 at the end
B) 3 at the start and 3 at the end
C) 2 at the start and 2 at the end
D) 0 at the start and 5 at the end

Question 75

To calculate monthly typical seasonal indexes, after computing the ratio-to-moving averages, the averages must be:

A) Divided by twelve.
B) Multiplied by twelve.
C) Summed and divided by two.
D) Summed and divided by twelve.

Question 76

To calculate monthly typical seasonal indexes, after computing the ratio-to-moving averages, the averages must be:

A) Divided by twelve
B) Multiplied by twelve
C) Summed and divided by twelve
D) Centered

Question 77

How can you describe the moving average method?

A) A method that smoothes out a time series.
B) A method to deseasonalize a time series.
C) A technique that results in a trend line equation.
D) A method for computing the slope of a trend line.

Question 78

To calculate monthly typical seasonal indexes, the specific seasonal indexes must be averaged for

A) Every month.
B) Every year.
C) Every quarter.
D) Every day.

Question 79

Given a linear time series trend, Ŷ = 5.2 + 3.1t, what is the forecast for 2010 if the time series started in 2003?

A) 23.8
B) 26.9
C) 30.0
D) 21.7

Question 80

If time series data are plotted on graph paper having an arithmetic scale that increases or decreases by equal percents, how will the graph look?

A) Straight line
B) Linear
C) Curvilinear
D) Logarithmic