Deck 18: Time Series and Forecasting

Question 1

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.

Answer 1

True

Question 2

Data that increases by equal percentages over a period of time appears as a ____________ on an arithmetic scaled graph.

Answer 2

curvilinear trend

Question 3

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.

Answer 3

True

Question 4

Episodic and residual variations can be projected into the future.

Question 5

A _____________ transformation should be used for a time series that increases by equal percentages over time.

Question 6

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

Question 7

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

Question 8

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

Question 9

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 10

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

Question 11

The two types of irregular variations that are unpredictable are ______________________ and _____________________.

Question 12

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.

Question 13

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

Question 14

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 15

For a straight trend line, ______________ represents the amount of change in Ŷ for each increase of one unit in t.

Question 16

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 17

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

Question 18

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 19

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

Question 20

The _____________ method is useful in smoothing out a time series.

Question 21

Autocorrelation can be corrected by using a ________.

Question 22

The __________________ method is most commonly used to compute typical seasonal indexes.

Question 23

A ______________ analysis predicts the future on the basis of past data.

Question 24

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

Question 25

A set of typical seasonal indexes is very useful in adjusting a time series for seasonal fluctuations. The resulting time series is the ___________________________.

Question 26

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

Question 27

Autocorrelation in a time series can be tested using the ___________.

Question 28

The ________________ method is used to determine the linear equation when the best fitting straight line is required.

Question 29

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

Question 30

In the linear trend equation, the ____ variable represents the Y-intercept.

Question 31

When the data is divided by the seasonal indexes, the ____________ is removed from a time series.

Question 32

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

Question 33

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

Question 34

Even if it is zero, every time series has a ________ component.

Question 35

If we eliminate trend, cyclical, and irregular variation from a monthly sales series, only the ___________________ time series component remains.

Question 36

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

Question 37

A typical sales index of 96 for January indicates that sales are ____________________.

Question 38

If four seasonal indexes are reported for a time series, data is thus reported _________.

Question 39

Autocorrelation occurs when successive residuals are _________.

Question 40

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

Question 41

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 42

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 43

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

A) Two at the start and one at the end
B) One at the start and one at the end
C) Two at the start and zero at the end
D) Zero at the start and two at the end

Question 44

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 these

Question 45

In a time series, economic periods of prosperity followed by recession are described as a(n) ___________.

A) secular trend
B) seasonal variation
C) cyclical variation
D) erratic variation

Question 46

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

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

Question 47

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 48

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 49

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

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

Question 50

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 51

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 52

The following linear trend equation was developed for the annual sales of the Jordan Manufacturing Company. Ŷ = 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 53

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

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

Question 54

If a major hurricane exerts an impact on the economy, that event could be classified as a(n) ___________.

A) secular trend
B) episodic variation
C) residual variation
D) seasonal variation

Question 55

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 56

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 57

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

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

Question 58

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 59

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 60

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 61

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

A) divided by 12.
B) multiplied by 12.
C) summed and divided by 12.
D) centereD.

Question 62

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 63

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

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

Question 64

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 65

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

A) Percents
B) Proportions
C) Amounts
D) Both percents and proportions are correct.

Question 66

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

A) 2
B) 4
C) 6
D) 12

Question 67

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 68

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 69

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 70

If time series data are plotted on graph paper having an arithmetic scale that increases or decreases by equal percents, what type of graph will it be?

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

Question 71

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

A) 2
B) 4
C) 6
D) 12

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

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 74

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 75

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 76

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

A) divided by 12.
B) multiplied by 12.
C) summed and divided by 2.
D) summed and divided by 12.

Question 77

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 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

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

A) Zero at the start and four at the end
B) Three at the start and three at the end
C) Two at the start and two at the end
D) Zero at the start and five at the end

Question 80

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

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