Six years of quarterly data of a seasonally adjusted series are used to estimate

Question

Six years of quarterly data of a seasonally adjusted series are used to estimate a linear trend model as Tt = 194.20 + 1.35f. In addition, quarterly seasonal indices are calculated as S_1 = 0.95, S_2 = 0.81, S_3 = 1.15. and S_4 = 1.14. Interpret the first quarterly index. In other words, what is the value of the series in the first quarter as compared to the average? 95% above 95% below 5% below 5% above Interpret the fourth quarterly index. In other words, what is the value of the series in the fourth quarter as compared to the average? 86% below 14% below 86% above 14% above Make a forecast for all four quarters of next year. (Round your answers to 2 decimal places.)

Explanation / Answer

(a1) 5% below

(a2) 14% above

(b) Quarter1: 0.95 * (194.20 + 1.35 * 73) = 278.11

Quarter 2: 0.81 * (194.20 + 1.35 * 74) = 238.22

Quarter3: 1.15 * (194.20 + 1.35 * 75) = 339.77

Quarter4: 1.14 * (194.20 + 1.35 * 76) = 338.35

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