DSC2008 Business Analytics Data and Decisions SEM 1, AY2013/2014

Assignment 2
Use data named with your student ID. Download your individual data from IVLEWorkbin Assignment2_DATA. Your data are named after your student ID. It consists of 4 columns: 1st column: time t. 2nd column: sales of warehouse ABC. 3rd column: investment gains of warehouse ABC. 4th column: profits of warehouse ABC. Write down your student ID in the footnote of your answer sheets. Summarize partial results in the table and place it on the first page of your answer sheets. Q1. Your fitted model: Point forecast: Interval forecast Fitted WMA model: RMSE of WMA forecasts Fitted SES model: RMSE of SES forecasts Which model is selected? Data is stationary? Yes or No Your fitted model: Q(6) test statistic for residuals Is Q(6) significant? Yes or No Is the model adequate? Yes or No

Q2.

Q3.

Question 1. [35 points] Consider sales of warehouse ABC. a. Choose the most appropriate model to forecast the sales of warehouse ABC. Justify your selection. [10 pts] b. Write down the fitted model. Interpret the meaning of each coefficient. [15 pts] c. Consider your fitted model. Compute point forecast and 95% interval forecast for time t = 101. Interpret your forecast result. [10 pts] Question 2. [30 points] Consider investment gains of warehouse ABC. a. Use weighted moving average method, with a period of 3, to forecast profits of warehouse ABC. It is to use the past 3 observations to predict the
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DSC2008 Business Analytics Data and Decisions SEM 1, AY2013/2014

future value. Write down your fitted model and compute RMSE based on the forecasts made for time t=5,,100. [10 pts] b. Use single exponential smoothing method to forecast the profits as well. Write down your fitted model and compute RMSE based on the forecasts made for time t=5,,100. [10 pts] c. Compare the two forecast methods. Which one is better? Justify your selection in terms of forecast accuracy? [10 pts] Question 3 . [35 points] Consider profits of warehouse ABC. a. Is the data stationary? Justify your answer using the ADF test. [10 pts] b. Select the most appropriate ARMA type model. Justify your selection using sample ACF and PACF plots Write down your fitted model. [10 pts] c. Is your model adequate? Justify your answer using the Ljung-Box Q(6) test. [10 pts] d. Discuss the pros and cons of three kinds of forecast methods: multiple-regression-based methods, smoothing methods and ARMA type models. [5 pts]

Note: 1. Both softcopy and hardcopy are required! 2. Softcopy: limited to 4 pages (including everything such as the summary table and cover page), 12 font Arial, double lines spacing. Upload your softcopy to your tutorial group folder on IVLE. Prefix your document with your student ID and name. The uploaded version should follow the format studentID_studentName_tutorialGroup.doc or studentID_studentName_tutorialGroup.pdf Submission due: 27 October, 2013 by 23:59 (IVLE). Penalty will be applied to late submissions. 3. Hardcopy: must be identical to the softcopy! Submit to your tutor in week 11, 28 Oct 1 Nov. Dont forget to write down your student ID, name and tutorial group on the hard copy! 4. This is an individual assignment! Normally, you would be encouraged to work with your colleagues, in order to learn from each other. However, you shouldnt collude with any other individual, or plagiarise their work. Suspected collusion or plagiarism will be dealt with according to the NUS assessment regulations. --- Do not let other people see your answers.
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DSC2008 Business Analytics Data and Decisions SEM 1, AY2013/2014

--- If other students ask for help, and you wish to help, do so by improving their understanding, not by giving them the answer. If you do not have time to help them, or if they are asking questions you feel you should not answer, tell them to ask the lecturer and tutors who are responsible to help.