The Quarterly Numbers of Applications for Home Mortgage Loans at a Branch

question 11

Essay

The quarterly numbers of applications for home mortgage loans at a branch office of a large bank are recorded in the table below.
-Analysts are looking at data in select technology industries during the first decade of the century before forecasting possible trends in the second decade. Below is data for startups in one industry in the years 2005-2010.
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(A) Perform a runs test and compute a few autocorrelations to determine whether this time series is random.
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(B) Obtain a time series chart. Which of the exponential smoothing models do you think should be used for forecasting based on this chart? Why?
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(C) Use simple exponential smoothing to forecast these data, using no holdout period and requesting 4 quarters of future forecasts. Use the default smoothing constant of 0.10.
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(D) Repeat (C), optimizing the smoothing constant. Does it make much of an improvement?

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Definitions:

Conversion Costs

The cumulative costs of direct labor and manufacturing overhead that are incurred to convert raw materials into finished goods.

Assembly Department

A division within a manufacturing facility where parts are put together to form finished products.

Weighted-Average Method

An inventory valuation method where costs of goods sold and ending inventory values are based on the average cost of all items available for sale.

Assembly Department

A division within a manufacturing facility where parts are put together to make a final product.