MANAGERIAL ECONOMICS

Forecasting

The data for the forecasting assignment can be downloaded here:

Forecasting data

There are two series of data:  (1) The number of residential units authorized by building permits in San Diego County, and (2) the seasonally adjusted unemployment rate in San Diego County.  The data are monthly observations for the period 2010 - 2014.  You should enter the values for (X) and (Y) in the table below.

1.  For the building permit data, estimate the linear trend model using dummy variables to correct for monthly seasonality.  Indicate the months for which there is significant seasonality and the direction of that seasonality.

2.  For the unemployment rate data, smooth the data with a six-month moving average and a 12-month moving average.  Based on these, what is the forecast for January 2015?  Which forecast is better according to the root mean square error criterion?

3.  Smooth the unemployment data using exponential smoothing, first with w = 0.30 and then with w = 0.50.  Based on these, what is the forecast for January 2015?  Which forecast is better according to the root mean square error criterion?

Final Output

Please submit a copy of your analysis in the form of a brief report along with supporting computer output by Thursday, March 19. If the output is a hard copy, it should be typed on 8 ½ x 11 or A4 paper. Please do not submit the report in a special report cover; a stable in the upper left hand corner would be adequate. The output may also be submitted as an e-mail attachment.