a) Using exponential smoothing, with a 5 0.6, then trend analysis, and finally linear regression, discuss which forecasting model fits best for Western Provincial’s strategic plan.

Justify the selection of one model over another.

b) Carefully examine the data. Can you make a case for excluding a portion of the information? Why? Would that change your choice of model? 
 

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****4.40 Western Provincial Trust Company is proud of its long tradition in Canada. It has backed the trend of financial and liquid- ity problems that has repeatedly plagued the industry. Deposits have increased slowly but surely over the years, despite recessions in 1983, 1988, 1991, 2001, and 2008. Management believes it is necessary to have a long-range strategic plan including a one-year forecast and preferably even a give-year forecast of deposits. They examine the past deposit data and also contrast it against the pre- vincial gross domestic product (GDP) over the same 44 years. The resulting data are in the following table: Year 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 Deposits 0.25 0.24 0.24 0.26 0.25 0.30 0.31 0.32 0.24 0.26 0.25 0.33 0.50 0.95 1.70 2.8 28 2.7 4.9 5.3 GDP Year 1988 1989 1990 1991 1992 0.4 0.4 0.5 0.7 0.9 1.0 1.4 1.7 12 1.1 0.9 1.2 1.2 12 1.6 15 19 1.9 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2007 2008 Deposits GDP 4.1 4.5 6.1 7.7 10.1 15.2 18.1 24.1 25.6 30.3 36.0 31.1 31.7 38.5 47.9 49.1 55.8 70.9 2.8 2.9 3.8 4.1 4.0 4.0 3.8 3.8 4.5 4.6 4.5 4.6 In Smillions In 5 billions Using exponential smoothing, with o 06, then trend analysis, ****4.40 Western Provincial Trust Company is proud of its long tradition in Canada. It has backed the trend of financial and liquid- ity problems that has repeatedly plagued the industry. Deposits have increased slowly but surely over the years, despite recessions in 1983, 1988, 1991, 2001, and 2008. Management believes it is necessary to have a long-range strategic plan including a one-year forecast and preferably even a give-year forecast of deposits. They examine the past deposit data and also contrast it against the pre- vincial gross domestic product (GDP) over the same 44 years. The resulting data are in the following table: Year 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 Deposits 0.25 0.24 0.24 0.26 0.25 0.30 0.31 0.32 0.24 0.26 0.25 0.33 0.50 0.95 1.70 2.8 28 2.7 4.9 5.3 GDP Year 1988 1989 1990 1991 1992 0.4 0.4 0.5 0.7 0.9 1.0 1.4 1.7 12 1.1 0.9 1.2 1.2 12 1.6 15 19 1.9 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2007 2008 Deposits GDP 4.1 4.5 6.1 7.7 10.1 15.2 18.1 24.1 25.6 30.3 36.0 31.1 31.7 38.5 47.9 49.1 55.8 70.9 2.8 2.9 3.8 4.1 4.0 4.0 3.8 3.8 4.5 4.6 4.5 4.6 In Smillions In 5 billions Using exponential smoothing, with o 06, then trend analysis,

Answer rating: 100% (QA)

Solution A Exponential Smoothing Trend Analysis Linear regression with t as the independent v... View the full answer