The below graph plots the daily prices of Gold over time.

a) Examine the plot and describe the issues that may arise using this time series data for forecasting. Offer solutions to these issues. (2 marks).

b) Offer a suitable forecasting method for this data. (2 marks).

The below output shows the results of an ARIMA model which was fitted to a time-series data of Japan’s GDP, and an excerpt of the data. Based on the below model and information:

a) Explain what the time series is likely to look like (i.e., cyclical, seasonal, with a trend). (2 marks).

b) Explain what is the predicted GDP value for Q4, 2021? (4 marks).

The following ACF plots were produced for raw data of monthly sales of two different variables, A and B.

a) Explain which variable (A or B) is likely to be easier to forecast. (2 marks).

b) Explain how your answer to part a) would change if these were residuals of an ARIMA model instead of “raw data of monthly sales”. (2 marks).

c) Explain which variable (if any) is likely more seasonal? (2 marks).

Variable A:

Variable B:

For each of the following time series plots, explain what type of transformation, if any, would make the series stationary. (3 marks).

1)

2)

The following monthly sales of chocolate boxes (in thousands of AUS dollars) have been recorded for January, February, March, and April, respectively: 8.5, 8, 8, 9. Examining the forecasting accuracy for the month of April only, explain which of the following forecasting method would you recommend: the Naïve method, the Average method, or the Simple exponential smoothing method (assuming alpha=0.85 and initial state of 8)? (3 marks).

 Question 6

The variable yearly income is examined in a regression setting where the predictor variable is lag (1) of income and the following output is produced.

a) Write down the regression equation. (2 marks).

b) Interpret the meaning of the slope. (2 marks).

c) Explain whether this model is appropriate to use for forecasting based on this output. (2 marks).

d) A dummy variable for gender (male=0, female=1) was added to the model. Interpret its coefficient of 0.1. (3 marks).