deseasonalizing forecasts

8/9/2019 Deseasonalizing Forecasts

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DeseasonalizingForecasts


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Agenda:

• Seasonality defined & seasonal adjustmentmethods

• Brainstorming Exercise•

Nuts and Bolts• How It Wors• Seasonal adjustment exam!le• Exercise• Summary• A!!endix A: Solution to Exercise


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Seasonality

• A re!eated !attern of s!ies or dro!sin the "aria#le of interest associatedwith a period of time

• Exam!les$ – %onsumer #uying ha#its

– rice of gasoline


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Seasonality

• %auses of seasonal mo"ement #yclass:

'( Weather )tem!erature*!reci!itation+

,( Calendar Events )religious orsecular festi"als+

-( Timing decisions )"acations*accounting !eriods+


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Seasonal Adjustment.ethods

• Seasonal index


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How It Wors:4eseasonali5ing 6orecasts

6our$ste! !rocedure for seasonaladjustments:

'( %alculate forecast for each demand"alues in the time series

,( 6or each demand "alue* calculate4emand76orecast

-( A"erage the 4emand76orecast for monthsor 1uarters to get the seasonal index

8( .ulti!ly the unadjusted forecast #y theseasonal index to find adjusted forecast"alue


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Season AdjustmentExam!le

• 6oster %om!any maes widgets(3he 1uarterly demand for itswidget is gi"en in Exhi#it '

• 9sing linear regressionforecasting* de"elo! a seasonalindex for each 1uarter andreforecast each 1uarter


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Seasonal Adjustments Exam!le =Ste! '

• 6orecasted demand

;>?(@??(@?


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Seasonal Adjustments Exam!le= Ste! ,

• 6or eachdemand "alue*calculate

4emand76orecast

• ear ' Cuarter

':


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Seasonal Adjustments Exam!le $Ste! -

• A"erage the 4emand76orecastfor the 1uarters to get the

seasonal index• Cuarterly Seasonal Index for

Cuarter ':

)(D,


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Seasonal Adjustments Exam!le $Ste! 8

• .ulti!ly the unadjusted forecast #ythe seasonal index to find theadjusted forecast "alues

• ear ' Cuarter ':

>>(> (- ; ,(D )adjusted forecast+


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Seasonal Adjustments Exam!le $Ste! 8


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Seasonal AdjustmentsExam!le


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Exercise• Smith %om!any maes widgets(

3he 1uarterly demand for itswidget is gi"en in Exhi#it A

• ou ha"e #een ased to de"elo!a seasonal index for each1uarter and reforecast each1uarter


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Exercise 3a#le


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Summary

• 4eseasonali5ing forecasts is effecti"efor – Short$term forecasting

– %om!ara#ility

– 4etecting trend changes early

• 3he Seasonal Index is the most

sim!le method for maing seasonaladjustments


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A!!endix A: Solution toExercise


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A!!endix A: Solution toExercise

deseasonalizing forecasts

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