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Hi, please am confused about forecasting trends and adjusting for seasonal variation. How do you find the value of a future quarter.
To forecast a future quarter, you need to forecast the trend for that quarter and then adjust it by the relevant seasonal variation.
There are many ways you could forecast the trend value (for example, you could use regression), however it would appear then the examiner simply expects to you calculate by how much on average the trend as grown per quarter in the past, and to then assume that it continues to grow at the same average amount per quarter.
Have a look at the question in December 2012’s exam (and the examiners answer to it) and you should see what I mean.
Thanks John. is it possible to get a trend equation by using regression analysis with the ACTUAL figures or use regression analsis with the TREND figures.
You could use the actual figures, but more it would usually be more sensible to use the trend figures (because of then being able to adjust for the seasonal variations).
In the exam, if you are specifically told what to do then you obviously do what is asked. If you are not told then it is very much looking at how many marks there are for that section. In last June’s exam, there were not so many marks and she just expected the trend to be forecast in the simplest way. (In my previous email I wrote December 2012’s exam. I should have written June 2012’s exam!)
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