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# Stat252 fall 2016

## Lab#9 take-home Ch:19.3-19.4

Lab#9: Take-Home part due Tuesday, Dec 6th by 11 pm.

## Moving Averages video:

Moving Averages and MAD, MSE and MAPE:
Exponential Moving and MAD, MSE and MAPE:

Example #1: from Lab#9 in class. Show how the MAD, MAPE and MSE are computed for SES(0.6)!!!! In other
words finish the second half of the table for SES(0.6) page3And explain which model MA(5) or SES(0.6) is
better.
Using the SE(0.6) values: MAD = (11.485 + 9.594 + 16.162)/3 = 12.414
MSE = (11.485^2 + 9.594^2 + 16.162^2)/3 = 161.72
MAPE = 100(1/3)((11.485/115) + (9.594/110) + (16.162/130)) = 10.38
The MA(5) data is better because the numbers a lower which means forecasts are closer to actual values

Example#2: Baking Profits. Sara Lee Corp., maker of food, beverage, and household products, is
known especially for its baked products, marketed under its corporate name. For the five years ending
July 1 of each year from 2002 to 2006, their bakery division reported the following profits.
Time Year

Profits(\$M) MA(3)=

2002

140

140

2003

120

134

140

2004

156

138.67

137.3

134

2005

160

145.33

138.67

144.11

137.3

2006

150

155.33

145.33

145.88

144.11

2007

155

155

155.33

148.614

145.88

2008

130

145

155

143.03

148.614

2009

150

145

145

145.121

143.03

2010

## Forecast using MA(3)

F t=

145

SES(0.3)

Forecast using
SES(0.3)

145.121

1) Plot the data. Which time series components seems to be present?(attach JMP graph)

component

## Stat252 fall 2016

Lab#9 take-home Ch:19.3-19.4
2) Find a 3 point moving average (. Enter in the column MA(3).

3) Use a 3-year moving average to predict profits for 2010. Because 2010 is current the most
accurate forecast we can make is the prediction for 2009 of \$145M
4) Use a 8 year moving average to predict profits for 2010. Because we dont have actual
profits for 2010 we cannot perform an 8-point moving average
5) Find a single exponential smoothing (with alpha=0.3. Enter in the column SES(0.3). See above
column
6) Predict the profit for 2010 using a single exponential smoothing with alpha=0.3 The most
accurate (and still not very reliable) prediction we can make is the previous years forecast
of \$145.121M
7) If the actual profits for 2010 were 140. Report the forecast errors for year 2010 using MA(3) and
SES(0.3) methods. Just based on these forecast errors, which model gives a smaller forecast
error for 2010. Assuming actual value of 140: MA(3) = 140 SES(0.3) = 143.585 Error(MA(3)) =
-5 Error(SES(0.3)) = -5.121. The MA(3) model provides a smaller forecast error
8) Which method (MA(3) or SES(0.3)) provides a more accurate prediction for the last three years
(m=3). MAD(MA(3)) = (25 + 5 + 5)/3 = 11.67 MSE(MA(3)) = (25^2 + 5^2 + 5^2)/3 = 225
MAPE(MA(3)) =(100)(1/3)((25/130) + (5/150) + (5/140)) = 8.712 MAD(SES(0.3)) = (18.614 +
6.97 + 5.121)/3 = 10.235 MSE(SES(0.3)) = (18.614^2 + 6.97^2 + 5.121^2)/3 = 140.429
MAPE(SES(0.3)) =(100)(1/3)((18.614/130) + (6.97/150) + (5.121/140)) = 7.541 The SES(0.3)
model has more accurate predictions as its mean errors are all lower than the MA(3) model.

## Example#3: Harry Potter Revenue.

DataLab#9 HarryPotter.jmp, where Y=Earning, X= time (0-16) and dummy variables ( Monday- Sunday -

a) Use JMP to plot Earnings vs Time (time series plot!!) and comment what components you see in the plot. Be
specific.
This data has downward trend and both a seasonal and
an irregular component

## Lab#9 take-home Ch:19.3-19.4

b) Use JMP to create a linear model. Call it Model #1. Attach the output.
Model 1: Earnings = 24.471 - 1.426*Time

c) Use JMP to compute the Durbin-Watson statistic and comment. (Just want you to practice the Durbin-Watson
test and dont worry about all other assumptions).

## D = 0.813 k = 1 n = 17 dL = 0.873 dU = 1.102

Based on these numbers we would have evidence of a positive
autocorrelation, meaning that the errors are not independent
d) Based on your answer in part c), what do you conclude from this test about Model #1.
We would reject the null hypothesis and conclude that errors are not independent
e) Create a Model#2, accounting for the seasonal component. Attach the output.

Model 2
On the surface Model 2 appears to be the better choice because it
has a higher R^2adj of 94.5% and a lower Se of 2.365.

## f) Interpret the coefficient for the variable Time.

For each additional day the average earnings for Harry Potter will decrease by \$1.429(Billions? Millions?)
g) Interpret the coefficient for the variable Saturday.
b(Saturday) = 4.571 The average increase in earnings for Harry Potter is \$4.571(Billions? Millions?) for
Saturdays when compared to Sundays, after accounting for time.

## h) Predict what earnings probably were for Monday 12/03/01.

Monday 12/03/01: Y = 25.524 - 12.238 - 1.429*17 = \$-11.007 This negative value for earnings implies that
there is some problem with Model 2 because earnings cannot be negative