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Demand Analysis & Forecasting

Case 9-6
Presented by:
Firoz
Pooja
Sumeet
Problem Given
Question 1- Fit ARIMA(0,1,0)(0,1,1)12 Model.
Do we need constant??
Question 2- Any other Model Fits??
Question 3 -Generate Forecast for next cycle
with chosen Model.
Question 4- Plot a Time Series Graph.
Data Provided
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1989 16.2 16.7 18.7 18.8 20.6 22.5 23.3 23.8 22.3 22.3 22.1 23.6
1990 20.1 21.6 21.6 21.9 23.4 25.9 26 26.2 24.7 23.5 23.4 23.9
1991 20 20.4 20.9 21.6 23.2 25.6 26.6 26.3 23.7 22.2 22.7 23.6
1992 20.2 21.1 21.5 22.2 23.4 25.7 26.3 26.2 23.6 22.8 22.8 23.3
1993 21 21.7 22.2 23.1 24.8 26.6 27.4 27.1 25.3 23.6 23.5 24.7
1994 21.2 22.5 22.7 23.6 25.1 27.6 28.2 27.7 25.7 24.3 23.7 24.9
1995 21.8 21.9 23.1 23.2 24.2 27.2 28 27.6 25.2 24.1 23.6 24.1
1996 20.7 22 22.5 23.6 25.2 27.6 28.2 28 26.3 25.9 25.9 27.1
1997 22.9 23.8 24.8 25.4 27 29.9 31.2 30.7 28.3 28.3 28 29.1
1998 25.6 26.5 27.2 27.9 29.4 31.8 32.7 32.4 29.5 29.5 29.3 30.3
Stationary Check on Sales
High
Probability.
Not
Stationary

Calculate D-1


Stationary Test on D-1
Low
Probability.
Stationary!!!
We are lucky

Time Series Plot for D1
See the
seasonality
for
12,24,26!!
Calculated difference with Lag 12
Calculate ACF and PACF for D2
with default Lag-36
Calculated ACF & PACF for D2
Lag -12
Question: Fit ARIMA(0,1,0)(0,1,1)12 Model.
Do we need constant??
For Constant
Prob is
0.978!!
Decision- ARIMA(0,1,0)(0,1,1)12
Final Estimates of Parameters

Type Coef SE Coef T P
SMA 12 0.8622 0.0701 12.30 0.000
Constant 0.000273 0.009785 0.03 0.978--To be run without
constant because values are very small and probability of constant is very high


Differencing: 1 regular, 1 seasonal of order 12
Number of observations: Original series 120, after differencing 107
Residuals: SS = 18.7170 (backforecasts excluded)
MS = 0.1783 DF = 105


Modified Box-Pierce (Ljung-Box) Chi-Square statistic

Lag 12 24 36 48
Chi-Square 13.3 19.4 33.1 43.1
DF 10 22 34 46
P-Value 0.206 0.622 0.511 0.594


Question Any other Model Fits??
Looking at the pattern
we want to try
ARIMA(0,1,0)(0,1,1)12
Model without constant
Result- ARIMA(0,1,0)(0,1,1)12
ARIMA Model: Sales

Estimates at each iteration
Iteration SSE Parameters
0 33.1048 0.100
1 29.7097 0.250
2 27.1644 0.400
3 25.2427 0.550
4 24.6871 0.601
5 23.9300 0.676
6 22.6607 0.814
7 22.4309 0.862
8 22.4309 0.862

Relative change in each estimate less than 0.0010
Final Estimates of Parameters

Type Coef SE Coef T P
SMA 12 0.8622 0.0686 12.57 0.000

Differencing: 1 regular, 1 seasonal of order 12
Number of observations: Original series 120, after differencing 107
Residuals: SS = 18.7232 (backforecasts excluded)
MS = 0.1766 DF = 106
Modified Box-Pierce (Ljung-Box) Chi-Square statistic

Lag 12 24 36 48
Chi-Square 13.3 19.4 33.1 43.1
DF 11 23 35 47
P-Value 0.274 0.680 0.561 0.636

Looks Good!!
MS=0.1766
Accepted
We also tried
ARIMA(0,1,1)(0,1,1)12 Model
Final Estimates of Parameters

Type Coef SE Coef T P
MA 1 0.1829 0.0963 1.90 0.060
SMA 12 0.8612 0.0680 12.66 0.000


Differencing: 1 regular, 1 seasonal of order 12
Number of observations: Original series 120, after differencing 107
Residuals: SS = 17.9477 (backforecasts excluded)
MS = 0.1709 DF = 105


Modified Box-Pierce (Ljung-Box) Chi-Square statistic

Lag 12 24 36 48
Chi-Square 9.2 16.0 26.4 34.7
DF 10 22 34 46
P-Value 0.512 0.818 0.819 0.889

MA prob is higher than 0.05!!
MS=0.1766
Rejected!!
Now, ARIMA(1,1,0)(0,1,1)12 Model
Final Estimates of Parameters

Type Coef SE Coef T P
AR 1 -0.1899 0.0956 -1.99 0.050
SMA 12 0.8600 0.0686 12.54 0.000


Differencing: 1 regular, 1 seasonal of order 12
Number of observations: Original series 120, after differencing 107
Residuals: SS = 18.0012 (backforecasts excluded)
MS = 0.1714 DF = 105


Modified Box-Pierce (Ljung-Box) Chi-Square statistic

Lag 12 24 36 48
Chi-Square 10.1 16.7 27.1 35.7
DF 10 22 34 46
P-Value 0.435 0.779 0.795 0.863

All Good!!
Accepted
MS=0.1714
ARIMA (1,1,0)(0,1,1)12 best fits
the Model
Question 3- Generate Forecast with
chosen Model
Model ARIMA(1,1,0)(0,1,1)12 Model w/o constant

Question 4-Time Series Plot again.
Forecasted
Period from
121 to 130

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