Ch.8 #5

Consider the following time series data.

Quarter	Year 1	Year 2	Year 3
1	4	6	7
2	2	3	6
3	3	5	6
4	5	7	8

1)  Use a multiple regression model with dummyvariables as follows to develop an equation to account for seasonaleffects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise.

If required, round your answers to three decimal places. Forsubtractive or negative numbers use a minus sign even if there is a+ sign before the blank. (Example: -300) If the constant is \"1\" itmust be entered in the box. Do not round intermediatecalculation.

Value = ________ + __________ Qtr1 +___________ Qtr2 + ___________ Qtr3

2) Compute the quarterly forecasts for next year basedon the model you developed in part (b). If required, round youranswers to three decimal places. Do not round intermediatecalculation.

Quarter 1 forecast _____________

Quarter 2 forecast_____________

Quarter 3 forecast_____________

Quarter 4 forecast_____________

3) Use a multiple regression model to developan equation to account for trend and seasonal effects in the data.Use the dummy variables you developed in part (b) to captureseasonal effects and create a variable t such thatt = 1 for Quarter 1 in Year 1, t = 2 for Quarter2 in Year 1,… t = 12 for Quarter 4 in Year 3.

If required, round your answers to three decimal places. Forsubtractive or negative numbers use a minus sign even if there is a+ sign before the blank. (Example: -300)

Value = __________ + __________ Qtr1 +__________ Qtr2 + ___________ Qtr3 + ________t

4) Compute the quarterly forecasts for next year basedon the model you developed in part (d).

Quarter 1 forecast _____________

Quarter 2 forecast_____________

Quarter 3 forecast_____________

Quarter 4 forecast_____________

5) Is the model you developed in part (b) orthe model you developed in part (d) more effective?

If required, round your intermediate calculations and final answerto three decimal places.

Model developed in part (b)	Model developed in part (d)
MSE

Justify your answer.