index factor

what's index factor?:confused1:
how to work out the index factor? thanks


  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034
    When you study time series analysis and moving averages you will often go ahead and look at forecasting from a trend.
    Invariably the process involves two activities to start with and then you can work out the forecast.
    One of the activities is to continue (or extrapolate) the trend into the future, the other is to find the seasonal variation.
    Very often you will use an additive (or absolute) seasonal difference by finding the sales that actually took place less the trend value. We tend to call this the seasonal variation.
    The alternative approach has many names, one is the multiplicative seasonal difference. Here the actual sales for each quarter is divided by the trend value. This produces the index factor (something like 0.86 or 1.14)
    You would find one of these for each quarter where you have both trend and actual values. Then you look at each quarter and if you have more than one index factor for say quarter 1 you would calculate an average.

    Once you have an index factor for say quarter 1, you would use it to forecast. If you are looking at quarter 1 of 2010 then the sales forecast would be the trend for that period multiplied by the index factor.

    Where have you come across this? Reports and returns?
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  • sdv
    sdv Registered Posts: 585
    came across this

    see if it any useful to you
  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034
    I've added this formula for index factors onto the thread link provided by sdv
    ......................conversion year index
    ..............................its own index

    This would give a value, probably a 1.something or a 0.something
    and is called the INDEX FACTOR

    Sadly, the terminology that is used sometimes has more than one meaning. My previous reply looking at multiplicative time series was not the appropriate application of index factor in the context of the whole question. Fortunately for me meibaker emailed me a spreadsheet which contextualised the question.
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