We are trying to forecast monthly sales for a company that sells ski equipment and clothing. Assume that the company’s sales peak each December and that the monthly sales have been growing at the rate of 1% each month. Answer the following questions.
a) Based on the description of these data, what time series components can you identify?
b) If you identified a seasonal component, what is the period?
c) If you use seasonal dummy variables, specify the dummy variables you would use.
d) After examining the residuals and using the information provided, you decide to transform the sales data. What transformation are you likely to suggest? Why?