DSC4812/101/0/2017

Tutorial Letter 101/0/2017

Forecasting
DSC4812

Year module

Department of Decision Sciences

This tutorial letter contains important information

about your module.

BARCODE
 CONTENTS
Page

1  INTRODUCTION ............................................................................................................................ 3 
2  PURPOSE AND OUTCOMES ........................................................................................................ 3 
2.1  Purpose .......................................................................................................................................... 3 
2.2  Outcomes ....................................................................................................................................... 3 
3  LECTURER AND CONTACT DETAILS......................................................................................... 5 
3.1  Lecturer ........................................................................................................................................... 5 
3.2  Department ..................................................................................................................................... 5 
3.3  University ........................................................................................................................................ 5 
4  RESOURCES ................................................................................................................................. 5 
4.1  Prescribed books ............................................................................................................................ 5 
4.2  Computer software ......................................................................................................................... 5 
4.3  Documents on myUnisa .................................................................................................................. 5 
4.3.1  Official study material ..................................................................................................................... 5 
4.3.2  Additional resources ....................................................................................................................... 5 
4.4  Library services and resources information .................................................................................... 6 
5  ASSESSMENT ............................................................................................................................... 6 
5.1  Assessment plan ............................................................................................................................ 6 
5.2  Assignments ................................................................................................................................... 7 
6  IN CLOSING ................................................................................................................................. 10 

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Dear Student

1 INTRODUCTION
Welcome to the module FORECASTING presented by the Department of Decision Sciences.

Because this is a fully online module, you need to use myUnisa to download study material
(tutorial letters and additional resources) and to submit your assignments. You will therefore
need to visit the DSC4812 website on myUnisa frequently.

To get started visit the website https://my.unisa.ac.za and login with your student number and
password. (If you haven’t used myUnisa before, you will need to create a password.)

You will find DSC4812-17-Y1 under More Sites on the webpage.

2 PURPOSE AND OUTCOMES

2.1 Purpose
Students who successfully complete this module will be able to develop an understanding and
knowledge of the theory of forecasting models and its applications in real world situations. The
approach attempts to develop an intuitive feel in the learner for the subject which will enable
him/her to identify the most suited forecasting model to predict a certain outcome in a data set.
2.2 Outcomes
For this module, there are several outcomes that we hope you will be able to accomplish by the
end of the course:

Learning outcome 1
Demonstrate knowledge and understanding of how to decompose a time series.

Assessment criteria
Knowledge and understanding of the basic principles of the decomposition of a time series are
demonstrated by
 identifying the pattern in time series data
 decomposing the pattern into the different components (trend, cycle and seasonality)
 calculating single and double moving averages
 applying the additive decomposition method on a time series data set
 applying the multiplicative decomposition method on a time series data set
 making forecasts with the additive or multiplicative decomposition methods
 evaluating the fitted models.

Learning outcome 2
Demonstrate knowledge and understanding on how to apply exponential smoothing methods on
a data set.

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Assessment criteria

Knowledge and understanding of exponential smoothing methods are demonstrated by

 identifying an appropriate exponential smoothing model or models to make a forecast for
a specific data set
 applying the appropriate model(s)
 forecasting future values with the model(s)
 evaluating the model(s)
 identifying the optimal exponential smoothing model.

Learning outcome 3
Demonstrate knowledge and understanding of simple linear regression.

Assessment criteria
Knowledge and understanding of simple linear regression are demonstrated by
 fitting an explanatory model relating Y and X
 forecasting future values with the model
 evaluating the model.

Learning outcome 4
Demonstrate knowledge and understanding of multiple linear regression.

Assessment criteria
Knowledge and understanding of the basics of multiple regression are demonstrated by
 selecting a short list of variables from a long list of variables to be included in an initial
multiple regression model
 fitting a multiple regression model on a data set with two or more explanatory variables
 evaluating the fitted model
 identifying the optimal set of explanatory variables
 forecasting future values with the model
 evaluating the fitted model and comparing different models.

Learning outcome 5
Demonstrate knowledge and understanding of the Box-Jenkins methodology for ARIMA
models.

Assessment criteria
Knowledge and understanding of the basics of the Box-Jenkins methodology are demonstrated
by
 examining correlations in time series data
 examining stationarity of time series data
 identifying an appropriate ARIMA model to be fitted to time series data
 estimating the parameters for the model
 evaluating the model (diagnostic checking)
 making forecasts with ARIMA models.

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3 LECTURER AND CONTACT DETAILS

3.1 Lecturer
You will find the information of the primary lecturer for this module on myUnisa.

When you contact the Lecturer, please do not forget to always include your student number and
the module code. This will help the Lecturer to assist you.

3.2 Department
The Department of Decision Sciences can be contacted as follows:
Telephone: 012 433 4684
e-mail: qm@unisa.ac.za

3.3 University
To contact the University, you should follow the instructions in the Studies@Unisa brochure.
Remember to have your student number available when you contact the University.

4 RESOURCES
4.1 Prescribed books
At http://otexts.com/fpp/ you will find a free online textbook by Rob J Hyndman and George
Athanasopoulos, Forecasting: principles and practice.

4.2 Computer software

The textbook is designed to be used with R and RStudio, which is free and available on almost
every operating system. The chapter, Using R, will guide you through the installation and the
code.

4.3 Documents on myUnisa

4.3.1 Official study material
The following tutorial letters are available here:

 Tutorial letter 101 (this tutorial letter)

4.3.2 Additional resources

Here you will find the documents on the related topics for this module. They are:

 Topic 1: Regression

 Topic 2: Time series decomposition and Exponential Smoothing

 Topic 3: ARIMA models

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4.4 Library services and resources information
For brief information, go to www.unisa.ac.za/brochures/studies
For detailed information, go to the Unisa website at http://www.unisa.ac.za/ and click on
Library.
For research support and services of personal librarians, go to
http://www.unisa.ac.za/Default.asp?Cmd=ViewContent&ContentID=7102.

The library has compiled a number of library guides:

 finding recommended reading in the print collection and e-reserves –

http://libguides.unisa.ac.za/request/undergrad
 requesting material – http://libguides.unisa.ac.za/request/request
 postgraduate information services – http://libguides.unisa.ac.za/request/postgrad
 finding, obtaining and using library resources and tools to assist in doing research –
http://libguides.unisa.ac.za/Research_Skills
 how to contact the Library/finding us on social media/frequently asked questions –
http://libguides.unisa.ac.za/ask

5 ASSESSMENT
5.1 Assessment plan
This module includes three compulsory assignments and a final assignment called a portfolio.
The portfolio is regarded as the examination for this module. The assignments will be marked
with relevant feedback.

The questions must be answered in full sentences with references to the relevant graphs or
printouts included. Embed all the graphs and printouts in the text in ONE pdf document to be
submitted on myUnisa.

All the assignments must be submitted on or before the due dates. Late assignments
will not be accepted on myUnisa.

Each assignment counts 33,3% towards your year mark, which in turn contributes 45% of
the final mark. The final assignment, the portfolio, will count 55% towards the final mark.

This final assignment (portfolio) is regarded as the examination for this module, and there is no
formal examination session.

You must obtain a subminimum of 40% for Assignment 04 to pass the module. This means that
even if you have received good marks for the first three assignments, but do not obtain 40% or
more for Assignment 04, you will not pass.

The completion of assignments is an important part of this module — it is only by doing the
assignments that you can be sure that you really understand the material. It is therefore in your
own best interests to complete all the assignments. If you encounter problems with a question,
please contact the lecturer for help or advice. The unique number, the relevant study material,
and the due dates for submission for each assignment are as follows:

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Assignment Unique Nr Due date Compulsory Tutorial matter

01 747470 3 May 2017 Yes Chapters 12, 13, 4 and 5
02 830899 28 June 2017 Yes Chapters 13, 6 and 7
03 872701 23 August 2017 Yes Chapters 13 and 8
04 803394 1 November 2017 Yes All above chapters

5.2 Assignments
Use the free online textbook by Rob J Hyndman and George Athanasopoulos, Forecasting:
principles and practice.

ASSIGNMENT 01 UNIQUE NO: 747470 DUE DATE: 3 MAY 2017

Preparation

1. Chapter 12 Using R, Install R and RStudio and do the tutorials

2. Chapter 13 Resources
 Time series course, Slides on 1. Introduction to forecasting
 Economic Forecasting course, Slides on
 1. Using R
 2. Getting started
 3. The forecaster’s toolbox

3. Chapter 4 Simple regression

Chapter 13 Resources
 Economic Forecasting course, Slides on 5. Simple regression
 Predictive Analytics course, Slides on 2. Chapter 4: Simple Regression

4. Chapter 5 Multiple regression

Chapter 13 Resources
 Economic Forecasting course, Slides on 6. Multiple regression
 Predictive Analytics course, Slides on 3. Chapter 5: Multiple Regression

Questions

1. 4.10 Exercises: Problem 1

2. Skin cancer rates have been steadily increasing over recent years. It is thought that this
may be due to ozone depletion. The following data are ozone depletion rates in various
locations and the rates of melanoma (a form of skin cancer) in these locations.
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 Ozone dep (%) 5 7 13 14 17 20 26 30 34 39 44
Melanoma (%) 1 1 3 4 6 5 6 8 7 10 9
a. Plot melanoma against ozone depletion and fit a straight line regression model to the
data.
b. Plot the residuals from your regression against ozone depletion. What does this say
about the fitted model?
c. What percentage of the variation in rates of melanoma is explained by the regression
relationship?
d. Scientists discovered that 40% of ozone was depleted in a certain region. What
would you expect to be the rate of melanoma in this area? Give a prediction interval.
e. Explain the assumptions and limitations in your prediction. What other factors may
play a role?

3. 5.8 Exercises: Problem 1

4. 5.8 Exercises: Problem 2

ASSIGNMENT 02 UNIQUE NO: 830899 DUE DATE: 28 JUNE 2017

Preparation

1. Chapter 6 Time series decomposition

Chapter 13 Resources
 Time series course, Slides on 4. White noise and time series decomposition
 Economic Forecasting course, Slides on 7. Time series decomposition

2. Chapter 7 Exponential smoothing

Chapter 13 Resources
 Time series course, Slides on 5. Exponential smoothing methods
 Economic Forecasting course, Slides on 8. Exponential smoothing

Questions

1. 6.7 Exercises: Problem 2

2. 7.8 Exercises: Problem 1

3. 7.8 Exercises: Problem 2

4. 7.8 Exercises: Problem 3

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ASSIGNMENT 03 UNIQUE NO: 872701 DUE DATE: 23 AUGUST 2017

Preparation

1. Chapter 8 ARIMA models

Chapter 13 Resources
 Time series course, Slides on
 3. Autocorrelation and seasonality
 8. Stationarity and differencing
 9. Non-seasonal ARIMA models
 10. Seasonal ARIMA Models
 Economic Forecasting course, Slides on 9. ARIMA models

Questions

1. 8.11 Exercises: Problem 5

2. 8.11 Exercises: Problem 6

3. 8.11 Exercises: Problem 7

4. 8.11 Exercises: Problem 8

ASSIGNMENT 04 UNIQUE NO: 803394 DUE DATE: 1 NOVEMBER 2017

Write a 15 – 20 pages report on the application of all the forecasting methods covered in this
module on a data set. Provide references to all sources that you use.
The methods are covered in
 Topic 1: Regression
 Topic 2: Time series decomposition and Exponential Smoothing
 Topic 3: ARIMA models
The data set must be a single variable time series with at least 100 observations. It can be
primary or secondary data. Refer to the source from which it is obtained. In the report, include
the values of the variable and describe the variable used.
Use a computer package, such as R, with which you should be familiar by now, to apply the
forecasting methods on the data. Include the output as well as graphs and tables in the report.
Interpret the output of each forecasting method on the data and describe your conclusions
clearly.
Compare the suitability of the forecasting methods for the chosen data set and justify your
choice.
The report should consist of an introduction, a description of the chosen data, the application of
each of the forecasting methods on the data set, and the comparison of the results and your
conclusions. References should be shown in a proper reference list/bibliography.

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The following is an example of a rubric that may be used for marking your project. Use it to
check the requirements for the portfolio.
The technical finish will count 20% and the content will count 80% of the final mark.

Technical finish
Topic Excellent Very good Average Below Bad
average
4 3 2 0
1
Academic
language
4
Mathematical
correctness
4
Tables/Figures
4
Referencing
4
Structure/Layout
4
Total 20
Content
Topic Marks
Data set presentation 10
Regression 20
Decomposition/ 20
Exponential Smoothing
ARIMA 20
Comparison 10
Total 80

6 IN CLOSING
Do not hesitate to contact your lecturer by email if you are experiencing problems with the
content of this tutorial letter or any aspect of the module.
Enjoy the forecasting journey!

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