Analytical Methods
for Business
Dr. Ronald K. Satterfield
Muma College of Business
University of South Florida
Time Series Modeling
Regression with Time as the X
Dr. Ronald K. Satterfield
Muma College of Business
University of South Florida
Plan for This Presentation
What is a Time Series? The Durbin-Watson Test & Statistic
Components of a Time Series Approaches for Handling Cyclicality
Really Basic Demonstration Seasonal Indices
Secular Trend Only Just a Little Trigonometry
Comparing Approaches
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
What is a Time Series
A time series is a collection of data obtained by observing a dependent
variable at periodic (usually equally spaced) points in time.
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Time Series
“Let’s do the time-warp again”
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Time Series
“Let’s do the time-warp again”
It’s a jump to the left
And then a step to the right
With your hands on your hips
You bring your knees in tight
But it's the pelvic thrust
That really drives you insane
Let's do the time-warp again
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Time Series Components
Secular Trend: The long-term trend. The tendency of a variable to increase
or decrease regularly over a extended time periods.
Cyclical Effect: Describes a fluctuation around a secular trend. Usually the
cyclical effect is regular or semi-regular and occurs over an extended time.
Seasonal Variation: Similar to a cyclical effect, but occurring over a shorter
time such as one year.
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
An Excel Example
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
“Let’s Do the Time Series Again” (in R)
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Gold Price Data
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Milk Price Data
Basic Regression
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
The Durbin-Watson Test
A Test of Autocorrelation. Testing the “I” in LINE.
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
The Durbin-Watson Test
A Test of Autocorrelation. Testing the “I” in LINE.
Ranges from 0 to 4
2 means no autocorrelation (1.5 to 2.5 is “normal”)
Approaching 0 means positive serial autocorrelation
Approaching 4 means negative serial autocorrelation
Hypothesis test with Ho: No autocorrelation, Ha: There is autocorrelation
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Milk Price Data
Exhibits Seasonal Fluctuations
An Approach Using Seasonal Indices
An Approach Using Trigonometric Functions
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Seasonal Indices
Demonstrated in Excel
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Seasonal Indices
Operationalized in R
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Seasonal Indices
The Trigonometric Approach
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Seasonal Indices
Cycles Interacting with Time?
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
Seasonal Indices
A Squared Term for a Non-Linear Secular Trend?
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
What Have We Done?
Define a Time Series The Durbin-Watson Test & Statistic
Components of a Time Series Approaches for Handling Cyclicality
Really Basic Demonstration Seasonal Indices
Secular Trend Only Just a Little Trigonometry
Compared Approaches
Introduction Demonstrations More Complexity Durbin-Watson
Seasonal Indices Some Trigonometry Nonlinearity? Conclusion
