Which of the following statements is/are true about time-series forecasting? A.

Question

Which of the following statements is/are true about time-series forecasting? A. (4) Time-series methods are useful for long-range forecasts. B. (1) The basic strategy of time-series forecasting is to identify the magnitude and form of each component based on available past data. C. (2) Time-series methods are used to make detailed analyses of past demand patterns over time and to project these patterns forward into the future. D. (3) Under time-series methods, demand can be divided into components such as average level, trend, seasonality, cycle and error. E. All but (4)

Explanation / Answer

A. Time Series forecasting is useful for forecasting something that is changing with time (like stock prices or profitability). Forecasting using time series is estimating how the sequence of observations will continue in the future. Some of the methods are ARIMA or exponential smoothing. Time series forecasting is meant for short term forecasts i.e a year or two ahead. Most of the time series forecasting methods like moving average, exponential smoothing are meant for short and medium term forecasts. Only the trend projections method is useful for the long range (more than 2 years) foreacasts.

Thus, most of the time series methods are not useful for long range forecasts. Thus, this is false.

B. The basic strategy of time-series forecasting is to identify the magnitude and form of each component based on available past data. The components are trend, seasonality, cyclical elements. Thus, this is true.

C. Time-series methods are used to make detailed analyses of past demand patterns over time and to project these patterns forward into the future. Be it the moving average or exponential smoothing, the future demand is projected using the data of past demand. Thus this is true.

D. Under time-series methods, demand can be divided into components such as average level, trend, seasonality, cycle and error. These are the various components or rather patterns of a time series data. Thus this is true.

Thus, all statements are true except for A(4). Hence the answer is E - all but (4).

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