Assignment 5 – BUS 336

Nathaniel Payne, February 25, 2019

1. (Time Series Analysis Problem) (10 marks)

Wheat is an important Canadian commodity, and is extremely important to the livelihood of many in
central Canada. Today, the Canadian Wheat Board is the largest wheat and barley marketer in the
world. One of Canada's biggest exporters, the Winnipeg-based organization sells grain to over 70
countries. Today, you have been hired by the Canadian Wheat board as a consultant for its activities.
The officers of the board are concerned about forecasts for wheat prices & wheat contracts which
have been secured over the past 22 weeks, and have asked you to consult with them & build some
time series projects to help with their analysis. They are unsure whether the prices for wheat futures
are moving & are unsure how to forecast effectively for the coming months ….
a. Prepare a line graph of the data. Do the data appear to be stationary or non-stationary? (1
mark)

b. Compute the three-period and five-period moving average predictions for the data set. Then:
(2 marks)
a. Prepare a line graph comparing the moving average predictions against the original data
b. Computer the MSE for each of the two moving averages. Which appears to provide the
best fit?
c. Compute forecasts for the next 2 weeks using the two-period and four-period moving
average techniques.

c. Use solver to determine the weights for a three and five period weighted moving average on
the data set that minimizes the MSE. (2 mark)
a. What are the optimal values for the weights?
b. Prepare a line graph comparing the weighted moving average predictions against the
original data
c. What are the forecasts for weeks 23 and 24 using this technique?

d. Fit a regression model to the data using the appropriate model.

e. Forecast the values that you would expect for the next two years using each of the methods.

2. (Time Series Analysis Problem) (10 marks)

Colliers Canada is currently one of the world’s largest industrial land resellers, and is a dominant
force in Canada. As a new consultant for Colliers, you have been hired & asked to make
predictions about the price of land prices in Metro Vancouver for standard 180 acre lots (prime
industrial ground, pre-zoned industrial). The corresponding data set showing the value of average
industrial land prices (in millions) in Vancouver over a previous time period. Please answer the
following questions in the workbook provided.
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 a. Prepare a line graph of these data. Do the data appear to be stationary or non-
stationary? (1 mark)

b. Fit a linear trend model to the data set. What is the estimated regression function? (1
mark)

c. Interpret the value of the R2 for your model? (1 mark)

d. Prepare a line graph comparing the linear trend predictions against the original data. (1
mark)

e. What are the forecasts for the next 2 years using this technique? (1 mark)

f. Fit either a quadratic trend or cubic trend model to these data (Use your judgment).
What is the estimated regression function of the best model? (1 mark)

g. Compare the adjusted-R^2 value for this model to that of the linear trend model. What
is implied by this comparison? (1 mark)

h. Prepare a line graph comparing the quadratic trend predictions against the original data.
(1 mark)

i. What are the forecasts for the next 2 years using this technique? (1 mark)

j. If you had to choose between the linear or polynomial (quadratic or cubic) trend
models, which would you use? Why? (1 mark)

3. (Time Series Forecasting Problem)

This question set contains the selling price of three-month-old calves at a livestock auction during
the past 22 weeks. (10 marks)

a. Prepare a line graph of the data. Do the data appear to be stationary or nonstationary?
b. Compute the two-period and four-period moving average predictions for the data set.
Then: (4 marks)
a) Prepare a line graph comparing the moving average predictions against the
original data (2 marks)
b) Computer the MSE for each of the two moving averages. Which appears to
provide the best fit? (2 marks)
c) Compute forecasts for the next 2 weeks using the two-period and four-period
moving average techniques. (2 marks)

2
 c. Use solver to determine the weights for a four period weighted moving average on the
data set that minimizes the MSE. (4 marks)
a) What are the optimal values for the weights? (2 marks)
b) Prepare a line graph comparing the weighted moving average predictions
against the original data (2 marks)
c) What are the forecasts for weeks 23 and 24 using this technique? (2 marks)

4. (Time Series Forecasting Problem)

The following questions refer to historical quarterly sales data for the division of a company that sells
heavy machinery (in millions) (10 marks)
a. Prepare a line graph of the data. Do the data appear to be stationary or nonstationary?

b. Fit a multiple regression model to the data that uses seasonality (quarterly) as a variable
within the model.
a) Forecast the values that you would expect for the years 2006, 2007, and 2008
(Ensure that your forecast is quarterly)

c. Fit a seasonal index to the data and forecast the values using a seasonal index for the
years 2006, 2007, and 2008 (Seasonality will be quarterly).