CBE Forecasting 5

Question 1

The Box-Jenkins methodology for ARIMA modeling follows which sequence of steps?

Accepted Answer

Identify → Estimate → Diagnose → Forecast

Answer

Estimate → Diagnose → Identify → Forecast

Answer

Forecast → Estimate → Identify → Diagnose

Answer

Diagnose → Identify → Forecast → Estimate

Question 2

The Partial Autocorrelation Function (PACF) is primarily used in ARIMA modeling to identify:

Accepted Answer

The order of autoregressive (AR) terms

Answer

The order of moving-average (MA) terms

Answer

The degree of differencing needed

Answer

Seasonal periodicity in the series

Question 3

A forecast combining multiple models typically outperforms individual models because:

Accepted Answer

It leverages diverse information and reduces variance without proportionally increasing bias

Answer

Averaging eliminates all systematic bias

Answer

Combined models always have lower AIC

Answer

Individual models contain no useful information

Question 4

Which statement about out-of-sample forecast evaluation is correct?

Accepted Answer

Out-of-sample evaluation uses data not seen during model estimation

Answer

In-sample fit metrics like R-squared are sufficient to judge forecast accuracy

Answer

A holdout sample should be taken from the middle of the time series

Answer

Overfitting is only a risk when sample sizes are very small

Question 5

When MAPE (Mean Absolute Percentage Error) is undefined or problematic, the most likely reason is:

Accepted Answer

Actual values include zeros or near-zeros

Answer

The series has high volatility

Answer

The forecast horizon is too short

Answer

Residuals are heteroskedastic

Question 6

Holt-Winters triple exponential smoothing adds a third smoothing equation specifically for:

Accepted Answer

Seasonal factors

Answer

Cyclical fluctuations

Answer

Random irregular components

Answer

Structural breaks

Question 7

Which characteristic distinguishes a cyclical component from a seasonal component in time-series analysis?

Accepted Answer

Seasons have a fixed calendar period; cycles have variable duration and amplitude

Answer

Cycles occur within a single calendar year; seasons span multiple years

Answer

Cycles have fixed, known periodicity; seasons do not

Answer

Cycles are always multiplicative; seasons are always additive