solution

Using the data in Problem 5-33, develop a multiple regression model to predict sales (both trend and seasonal components), using dummy variables to incorporate the seasonal factor into the model. Use this model to predict sales for each quarter of the next year. Comment on the accuracy of this model

Problem 5-33

A major source of revenue in Texas is a state sales tax on certain types of goods and services. Data are compiled and the state comptroller uses them to project future revenues for the state budget. One particular category of goods is classified as Retail Trade. Four years of quarterly data (in $millions) for one particular area of southeast Texas follow:

(a) Compute seasonal indices for each quarter based on a CMA.

(b) Deseasonalize the data and develop a trend line on the deseasonalized data.

(c) Use the trend line to forecast the sales for each quarter of year 5.

(d) Use the seasonal indices to adjust the forecasts found in part (c) to obtain the final forecasts.

 
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