Question

3. Consider the quarterly sales (measured in thousands of pounds) of a women's clothing store during the first quarter of year 2001 to the third quarter of year 2017. a) Examine the following three graphs and comment on the initial analysis for patterns. (6 marks) 150.00 140.00- 130.00 12000- 110.00 vear sales DIFF(sales,1) Coefficient Coeficiert idence Linit Confidece Lin -Lower Confidence Lint 05- 0 5- TTT a5- 뽀와한모다포안오로 Lag Number Lag Number b) Decomposition using the additive model for the data displayed in part (a) has been undertaken. The following seasonal factors were obtained, 2.93, -7.75, -0.03, 4.86, for the 1st to the 4th quarter of each year. (i) Explain why it is necessary to undertake decomposition analysis prior to ARIMA modelling and why the additive model seems a plausible choice