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![LECTURE 9 BASICS OF TIME SERIES FORECASTING Saidgozi Saydumarov Sherzodbek](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-1.jpg)
LECTURE 9
BASICS OF TIME SERIES FORECASTING
Saidgozi Saydumarov
Sherzodbek Safarov
QM Module Leaders
ssaydumarov@wiut.uz
s.safarov@wiut.uz
Office
hours: by appointment
Room IB 205
EXT: 546
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![Lecture outline: to estimate the change of a value over](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-2.jpg)
Lecture outline:
to estimate the change of a value over time and
graph the dynamics of the value
to apply the time series analysis to forecasting a value
to use the two forecasting models:
a) Additive
b) Multiplicative
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![Components of time series graph Trend – the overall pattern](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-3.jpg)
Components of time series graph
Trend – the overall pattern of changes
in a specific value over a long period of time (or an overall movement of the time series graph).
Seasonal – regular patterns of variation over one year or less (or repetitive movements of the time series graph).
Irregular – random changes that generally cannot be predicted (or random movements of the time series graph for periods less than a year).
Cyclical – variations above or below the trend line for periods of longer than one year (or cyclical movements of the time series graph for periods of longer than one year)
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![Additive vs Multiplicative Model Additive model Multiplicative model](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-4.jpg)
Additive vs Multiplicative Model
Additive model
Multiplicative model
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![Case 1: quarterly computer sales](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-5.jpg)
Case 1: quarterly computer sales
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![Additive model Find 4-point moving average and start placing them](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-6.jpg)
Additive model
Find 4-point moving average and start placing them from the
mid of 2nd and 3rd place
Calculate the Central Moving Average (Trend)
Subtract trend (CMA) value from the actual value to find the deviations
Compute average deviation for particular period
Place the seasonal adjustments
Obtain the difference between average deviations and the seasonal adjustments for the seasonal variations.
To forecast, simply add the seasonal adjustment to forecasted Trend (CMA) value
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![Additive model](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-7.jpg)
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![Additive model Trend line for the 4th quarter of 2007](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-8.jpg)
Additive model
Trend line for the 4th quarter of 2007 indicates that
the value approximately equals to 142
The seasonal variation for this quarter is 7.95
Thus, forecasted value equals to
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![Multiplicative model Find 4-point moving average and start placing them](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-9.jpg)
Multiplicative model
Find 4-point moving average and start placing them from the
mid of 2nd and 3rd place
Calculate the Central Moving Average (Trend)
Divide the actual value to the trend (CMA) value to find the deviations
Compute average deviation for particular period
Place the seasonal adjustments
Obtain the ratio between average deviations and the seasonal adjustments for the seasonal variations.
To forecast, simply find the product of the seasonal adjustment and forecasted Trend (CMA) value
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![Multiplicative model](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-10.jpg)
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![Multiplicative model Trend line for the 4th quarter of 2007](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-11.jpg)
Multiplicative model
Trend line for the 4th quarter of 2007 indicates that
the value approximately equals to 142
The seasonal variation for this quarter is 1.07
Thus, forecasted value equals to
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![Concluding remarks Today, you learned Graphical display of the change](/_ipx/f_webp&q_80&fit_contain&s_1440x1080/imagesDir/jpg/155024/slide-12.jpg)
Concluding remarks
Today, you learned
Graphical display of the change of a value
over time
Time series analysis
Two time series models: additive and multiplicative
Forecasting future value with the suitable model