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Incorporating Seasonality Modeling seasonality with trend Forecasting

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

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Defining Dummy Variables Eviews: @seas

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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

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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

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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

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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

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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

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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

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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

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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

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