Additive time series model
Use an additive model when the seasonal effect is expressed as a roughly constant number of units across the relevant level of the series. Forecast by adding the stated seasonal adjustment to the trend; negative adjustments reduce it. Check the model and question assumptions rather than switching automatically between additive and multiplicative methods.
Worked example
A trend forecast is $100,000 and the seasonal adjustment is −$15,000. The additive forecast is $85,000.
Common mistake
Multiplying the trend by a seasonal amount instead of adding it, or confusing a negative adjustment with a negative factor.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
