Catherine Hood Consulting

Sample Quiz: Why Seasonal Adjustment?

What is the goal of seasonal adjustment?
- To estimate and remove the seasonal effect from a time series
- To smooth out and eliminate any turning points
- To erase the effect of tragedies such as deadly huricanes
Correct

The basic goal of seasonal adjustment is to decompose a time series into a several different components, including a seasonal component, for the purpose of removing the seasonal effect.

Incorrect

Seasonally adjusted series are generally smoother than the unadjusted original series, but we want to use this smoother series to help us see turning points, not always to smooth the series so much that the turning points are gone.

Incorrect

Events like huricanes can be tragic, but that doesn't mean they aren't an important part of our time series. They are not seasonal effects, and they are not eliminated from the seasonally adjusted series.
Seasonal effects may be caused by
- Natural factors, such as the weather
- Administrative measures
- Religious traditions
- All of the above
Incorrect

Natural factors can cause seasonal effects, but there is a better answer.

Incorrect

Administrative measures can cause seasonal effects, but there is a better answer.

Incorrect

Religious traditions can cause seasonal effects, but there is a better answer.

Correct

"All of the above" can cause seasonal effects. Warmer weather in the summer, end of the tax year, and buying Christmas gifts can all be causes of seasonal effects, depending on the particular series.
What is the disadvantage of looking at year-to-year changes in a time series?
- We don't have enough data.
- It is more difficult to see turning points at the end of the series.
- Large seasonal oscillations make smaller movements difficult to see.
Incorrect

I hate to bring bad news, but if you are lacking the data from the past year so that you can not compute a year-to-year change, then you also do not have enough data for seasonal adjustment.

Correct

This is the main disadvantage. It will take several months or quarters before we can see any turning points at the end of the series.

Incorrect

Though this statement is true, large seasonal oscillations have nothing to do with the disadvantages of year-to-year changes.

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