Statistical Methods & Forecasting Flashcards

A market analyst wants to forecast next quarter's demand using the Holt-Winters method. This method specifically accounts for:

Answer: Both trend and seasonality

Holt-Winters triple exponential smoothing captures level, trend, and seasonal components simultaneously.

The Augmented Dickey-Fuller (ADF) test is used to test for:

Answer: The presence of a unit root in a time series

The ADF test evaluates whether a time series has a unit root, which would indicate non-stationarity.

In logistic regression applied to market segmentation, the output of the model represents:

Answer: The probability of belonging to a category

Logistic regression models the probability that an observation belongs to a given class using the logistic (sigmoid) function.

A scatter plot of two market variables shows a curved (non-linear) relationship. The best immediate remedy in regression analysis is to:

Answer: Transform one or both variables (e.g., logarithm)

Variable transformations such as logarithms, square roots, or polynomials can linearize non-linear relationships for regression.

When performing cross-validation on a forecasting model, the primary goal is to:

Answer: Estimate out-of-sample predictive performance

Cross-validation assesses how well a model generalizes to unseen data by testing it on held-out folds not used in training.

A leading economic indicator is valuable in market forecasting because it:

Answer: Moves in advance of the business cycle it predicts

Leading indicators turn before the economy turns, providing advance signals useful for forecasting future economic conditions.

The Granger causality test determines whether:

Answer: Past values of one variable improve forecasts of another

Granger causality tests whether lagged values of X contain information that significantly improves the forecast of Y beyond Y's own lags.