Time

Series Analysis with NumXL

Inthisdocument,wewilldemonstratethefewstepstoconvertarawtimeseriesdataintoarobust forecastusingNumXL. Asanexample,weareusingthemonthlyelectricpowerdemand(inMWh)forthecityofJeddeh(Saudi Arabia)between2003and2010.
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DEMAND

Thetimeseriesinthefigureabovedemonstratesaseasonalityoftwelve(12)monthsandanupward trendovertime. Thisdatacanbeexplainedbybreakingdownthepowerdemandintoits'twoprimarycomponents:(1) theindustrialdemand,and(2)theresidentialandbusinessdemand.Theresidentialandbusiness demandisinfluencedbyweatherpatterns(e.g.season).Youcanseethisthroughtheincrease/decrease useofelectricityforcooling/heating.Ontheotherhand,theindustrialdemandisratherflat.Asan input,theindustrialdemandisdrivenprimarilybytheeconomicconditionsofthecityorindustry,and tolessextentbyweatherpatterns.

NumXLTutorial

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Step 1: Summary Statistics

UsingNumXLtoolbar,launchthedescriptivestatisticsWizard.

Forourillustration,wewillkeepalloptionsselected.Foroutput,selectthecellinyourspreadsheet whereyouwishthetabletobewrittento:
DescriptiveStatistics AVERAGE: 99004.77 STDDEV: 26026.9 SKEW: 0.03 EXCESSKURTOSIS: 0.88 MEDIAN: 98989 MIN: 47772 MAX: 149954 Q1: 77524 Q3: 117380.5 SignificanceTest Target pvlaue 0.000 0.00% 0.000 0.000 45.76% 3.63% 5.00% Different? TRUE FALSE FALSE Test pvlaue Whitenoise 0.00% NormalDistributed? 19.85% ARCHEffect? 0.00% Result? FALSE TRUE TRUE

NumXLTutorial

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 IMPORTANT:Inthetableabove,NumXLgeneratestheformulasintoyourspreadsheet.Youcaneasily reviewthecalculation,and,ifneeded,makeanyproperchanges.

Step 2: Correlogram Analysis

UsingtheNumXLtoolbar,launchtheCorrelogramWizard:

Forthisillustration,wewillcomputeandplottheACFandPACFforfirst20lags.

NumXLTutorial

SpiderFinancialCorp,2011

TheACFplotdemonstratesaclassiccasefortheAirLinemodelwithacyclelengthof12steps.

Step 3: Data Transformation

Thereisnoneedtotransformthedatabeforemodeling.TheAirLinemodelwillstabilizetheinputseries throughthedifferencingtermsinitsdefinition.

NumXLTutorial

SpiderFinancialCorp,2011

Step 4: Modeling
UsingNumXL,themodelingprocessconsistsof3majorsteps:(1A)modelspecification,(2B)calibration and(3C)residualsdiagnosis.

1A: Model Specification

ClicktheAirLineIconontheNumXLtoolbar.

NumXLwillprepareatableinyouspreadsheetwithmodelscoefficient,goodnessoffitandresidual diagnosisroutines.Note:thevaluesofthemodelarenotoptimalyet.

NumXLTutorial

SpiderFinancialCorp,2011

2B: Model Calibration

Selectthecellwherethemodeltablestartsfrom(i.e.AIRLINE(12)).Clickonthecalibrationiconinthe toolbar.

TheMSExcelsolverdialogwillpopuponyourscreenwithyourmodelspecificationsfilledin.Clickthe Solvebutton. IMPORTANT:InExcel2010,thesolverhasanonnegativeconstraintturnedonbydefault.The constraintrestrictsthemodel'scoefficientstononnegativevalues.Asaresult,thesolveryieldsaless thanoptimalsolution.Theconstraintisnotrelevantforthemodelcalibrationprocess,andshouldbe turnedoff. UncheckthisoptionbeforeyouclickSolve.

NumXLTutorial

SpiderFinancialCorp,2011

Theoptimizerlocatesasetofcoefficientvaluesthatfitsourdatabest,anddefinesastableAirLine model.

NumXLTutorial 7 SpiderFinancialCorp,2011

3C: Residual diagnosis

Theresidualsdiagnosisroutinesarealreadypopulatedinyourspreadsheetwithyourmodelparameters. Nowisagoodtimetoreexaminewhethertheoptimalmodelsatisfiestheunderlyingassumptions.

Step 5: Forecasting
ToperformaforecastusingNumXL,selectthecellofthemodelstable(i.e.AirLine).Clickonthe Forecasticoninthetoolbar.

Theforecastwizardwillpopup.Selecttherealizedobservations(i.e.tailpointsofyoursampledata), andtheforecasthorizoninunitsofsteps. NumXLTutorial 8 SpiderFinancialCorp,2011

Forthisillustration,thelast23observationsinthesampledatawerechosen,thentheforecasthorizon wassetto30steps(orunits),asshownabove.

Plottheforecastanditsconfidenceintervals.

NumXLTutorial

SpiderFinancialCorp,2011


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