Question

Consider the following quarterly time series. ​ Quarter Year 1 Year 2 Year 3 1 923...

Consider the following quarterly time series.

Quarter

Year 1

Year 2

Year 3

1

923

1,112

1,243

2

1,056

1,156

1,301

3

1,124

1,124

1,254

4

992

1,078

1,198

Use a multiple regression model with dummy variables for quarters 1, 2, and 3 and a time variable. What is your forecast for year 4 quarter 1? Round your answer to one decimal place.

Homework Answers

Answer #1

The forecasted value is 1317.9

The working the done using R, script can be found in the end.

The dummy variables are created and data has been organised as follows:

Q1 = 1 ; Quarter 1

0 ; otherwise

Similarly Q2 & Q3 are created.

Data:

R Script:
> model = lm( Value ~ Year+Q1+Q2+Q3, data = timeseries )
> model

Call:
lm(formula = Value ~ Year + Q1 + Q2 + Q3, data = timeseries)

Coefficients:
(Intercept) Year Q1 Q2 Q3  
864.083 112.625 3.333 81.667 78.000  

> newdata = data.frame(Year=4, Q1=1 , Q2=0, Q3=0)
> newdata
Year Q1 Q2 Q3
1 4 1 0 0
> predict(model,newdata)
1
1317.917
> round(predict(model,newdata),1)
1
1317.9

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