ECO 6214 : Assignment 1: Forecasting ...

Assignment 1: Forecasting

Introduction

This assignment will assess your knowledge of the concepts and techniques you have learned this week. Please answer the questions and submit your answers in a Word document.

Instructions

Submit your answers to both questions in a Word document. Download the data sets and use Excel to solve the problems.

Question 1. CoastCo Insurance is interested in developing a forecast of larceny thefts in the United States. Download the spreadsheet  for the available data.

1. Plot this series in a time series plot and make a naive forecast for years 2 through 19. 
2. Plot actual and forecast values of the series for the years 1 through 19. (You will not have an actual value for year 19 or a forecast value for year 1.)
3. Calculate the RMSE  for years 2 through 18. On the basis of these measures and what you see in the plot, what do you think of your forecast? Explain. 

Watch the given video if you do not know how to plot data in Excel:

Igines. (2012, December 9). How to make a line graph in excel (scientific data). [Video file] [6 min 41 sec]. Retrieved from https://www.youtube.com/watch?v=Xn7Sd5Uu42A&t=1s

Question 2. As the world’s economies become increasingly interdependent, various exchange rates between currencies have become important in making business decisions. For many U.S. businesses, the European Union exchange rate (in euro per U.S. dollar) is an important decision variable. Download the spreadsheetwith the data on this exchange rate (EXEUR) by month for a two-year period.

1. Prepare a time series plot of this data series.
2. Use the naive forecasting model to forecast EXEUR for each month from year 1 M2 through year 3 M1.
3. Plot actual and forecast values of the series for the year 1 M1 through year 3 M1. (You will not have an actual value for year 3 M1 or a forecast value for year 1 M1)
4. Calculate RMSE for the period from year 1 M2 through year 2 M12. 

Other helpful Videos:

Plotting a series in a time series plot: A time series plot is a graph where time is the unit on the x-axis. The x-axis is labeled as the time-axis, and the y-axis represents the variable being measured. The x-values correspond to the time period, which can range from year 1 to year 18 for the first question and from year 2016 M1 to 2017 M12 for question 2. The y-values represent Larceny Theft for question 1 and EXEUR for question 2.

Plotting data in a time series plot. (1:36)

Plot actual and forecast values: In this plot, you are asked to graph two series together: the actual data and the forecast that you calculated. You can find an example of how to plot two series in a time series plot. The x-axis represents time, and the y-axis represents both actual and forecasted values. Here is a short video on how to plot actual and forecasted values in a time series plot:

Plot Multiple Lines in Exce. (1:56)

Submission

• Submit your answers in a Word document.
• Submit the Excel files to show your calculations.
• Include the relevant graphs of actual and forecast values of the series. Please do not forget to title your graph.

Submit your calculations and answers in a 1–2-page document and spreadsheet to the Dropbox by Day 7 of this week.