Incorporating Seasonality Modeling seasonality with trend Forecasting

Seasonality Data = Trend + Season (Quarter, say) +  * * * * * * * * * * * * IIIIIIIV

Defining Dummy Variables

Seasonal Model - 1 for Quarterly Data Note: Q4 is not included Y t = b 0 +  1 Q1 t +  2 Q2 t +  3 Q3 t +  t

Interpretation of the Model QuarterModel I Y t =  0 +  1 +  t II Y t =  0 +  2 +  t III Y t =  0 +  3 +  t IV Y t =  0 +  t

Seasonal Model – 2 for Quarterly Data Y t =  1 Q1 t +  2 Q2 t +  3 Q3 t +  4 Q4 t +  t Note:  0 is not included

Interpretation of the Model Quarter Equation (  is omitted) I Y t =  1 +  t II Y t =  2 +  t III Y t =  3 +  t IV Y t =  4 +  t

Model for Trend and Seasonality-1 Y t = b 0 +  1 t +  1 Q1 t +  2 Q2 t +  3 Q3 t +  t Note: Q4 is not included

Interpretation of the Model Quarter Equation (  is omitted) I Y t =  0 +  1 t +  1 +  t II Y t =  0 +  1 t +  2 +  t III Y t =  0 +  1 t +  3 +  t IV Y t =  0 +  1 t +  t

Model for Trend and Seasonality-2 Y t =  1 t +  1 Q1 t +  2 Q2 t +  3 Q3 t +  4 Q4 t +  t Note:  0 is not included

Interpretation of the Model QuarterEquation I Y t =  1 t +  1 +  t II Y t =  1 t +  2 +  t III Y t =  1 t +  3 +  t IV Y t =  1 t +  4 +  t