STA361: TIME SERIES ANALYSIS

Question 1

a) Write short notes on the following, giving examples and graphical illustrations
where necessary;

i. The Auto Correlation Function (ACF) of an AR(P) process

ii. Seasonal Variation
iii. The difference sign test method
iv. Stationary Time Series.

b) Discuss the four components of time series. Give examples and graphical
illustrations.

(10 + 25+16 =51 marks)

Question 2

(i) Derive the weights and write down the expression for a simple moving
average of order 2, overlaid by a moving average of order 4.
(ii) State and give a brief description of the four components of a time series data.

(6+9=15 marks)
Question 3

Consider a random walk process given by yt = b0 + yt -1 + e t , where e t are independent

and identically distributed with mean zero and variance, s 2
(i) Show that the above process is not stationary.
(ii) Show that Dyt is a stationary process.
(iii) Find the covariance between yt and yt - k , and hence show that the
1

autocorrelation function between yt and yt - k , is rt ,k �t - k �

2
= � �.
�t �
(5+5+15=25)

1
Question 4

(i) Define a turning point and show that the mean of the total number of turning
2
points is (n - 2) .
3

(ii) Briefly outline the steps required in deseasonalizing a time series using MA and
additive model.

(10+5=15 marks)
Question 5

1. Define a Stationary Time Series

2. Consider an auto regressive process given by yt = b1 yt -1 + e t , where e t ~ i.i.d (0, s )
2

Show that the above process is a stationary by finding;

(i) Mean of yt , E ( yt )
(ii) Variance of yt , Var ( yt )
(iii) Covariance between yt and yt - k , Cov( yt yt - k )

(5+4+5+5 each=29 marks)

Question 6

(a) Show that by fitting a polynomial of order 3 to the first set of seven points in the
series, the weights needed to calculate the trend values at the middle of the terms
1
would be (-2,3, 6, 7, 6,3, -2) .
21
(b) Briefly outline all the steps involved in testing for seasonality in a given series.
(c) Define Exponential Smoothing.
(10+10+5=25 marks)

2
Question 7

(a) Briefly explain all the steps involved in de-seasonalizing a time series using the
additive seasonal model yt = mt + st + e .
(b) The table below present part of the solution of de-seasolizing a time series
data by using method in (b) above. Complete the table.
(10+10=20marks)

t yt A B C D E
1 7.7 * -6.44922 14.14922
2 15.6 * 6.447655 9.152345
3 16.9 a 4.05 5.85 g 11.04922
4 9.8 13.85 -4.05 e -5.84922 15.64922
1 10.5 15.15 -4.65 -6.45 -6.44922 i
2 20.8 16.15 4.65 6.446875 6.447655 14.352345
3 22.1 16.85 c 5.85 5.85078 16.24922
4 12.6 17.85 -5.25 -5.85 -5.84922 18.44922
1 13.3 19.15 -5.85 -6.45 -6.44922 19.74922
2 26 b 5.85 6.446875 6.447655 19.552345
3 27.3 20.85 6.45 5.85 5.85078 21.44922
4 15.4 21.85 -6.45 f -5.84922 j
1 16.1 23.15 -7.05 -6.45 -6.44922 22.54922
2 31.2 24.15 7.05 6.446875 6.447655 24.752345
3 32.5 24.85 7.65 5.85 h 26.64922
4 18.2 25.85 -7.65 -5.85 -5.84922 24.04922
1 18.9 27.15 -8.25 -6.45 -6.44922 25.34922
2 36.4 28.1625 d 6.446875 6.447655 29.952345
3 37.7 * 5.85078 31.84922
4 21.1 * -5.84922 26.94922
-0.00078

Question 8

a) Data on the following table shows the monthly shipment of air conditioners of a
leading manufacturing company from 1983 to 1986. Complete the table.
(NB the seasonal indices have been scaled by a constant)