Question

How is a seasonal index computed from a regression line analysis?

Short answer

Answer

Seasonal variationsare measured in terms of an index, called a seasonal index. It is an average that can be used to compare an actual observation related to what it would be if there were no seasonal variations.

Step-by-step solution

Regression line analysis

In statistical modelingRegression line analyses are a set of statistical processes for estimating the relationship between the dependent variable and one or more independent variables.

Computation of seasonal index from a regression line analysis

Jacobs and Chase (2010) describe the method for computing the seasonal index from aregression line analysis as a five-step process:-

1. First,the seasonal factor is determined.
2. Second,the original data is depersonalized by dividing the original data by the seasonal factor.
3. Third,the least-squares regression line is developed for the depersonalized data.
4. Fourth,the progression line is projected through the period to be forecast.
5. Lastly,the final forecast is created by adjusting the regression line by the seasonal factor.