Example Time Series & Multivariate Regression in R -

Predicting Steel Demand

Example Time Series & Multivariate Regression in R -

Predicting Steel Demand

Time Series Time Series

• The math is pretty substantial (at least for me!)

• Key concepts are seasonality, auto-regression, trend and level

• We used Holt-Winters and ARIMA (auto regression integrated moving average); plenty of other functions exist

Client management wants to predict demand (in tons) of steel

Client management wants to predict demand (in tons) of steel

Some HW CodeSome HW Code

Prediction Prediction

ARIMAARIMA

• “Seasonal ARIMA modelsare powerful tools in the analysis of time series as they are capable of modeling a very wide range of series”

• Best to learn thoroughly and from deep study. But if you have a day job …. Just pluck code to optimize the parameters and use it

Here’s the code for selecting the best ARIMA parameters

Here’s the code for selecting the best ARIMA parameters

Multivariate RegressionMultivariate Regression

• Identified about 150 economic indicators; from economy.com and other sources.

1 response; 150 predictors – tedious to find best COR

1 response; 150 predictors – tedious to find best COR

Now we know top ten predictors for agriculture – let’s build a model

Now we know top ten predictors for agriculture – let’s build a model

Whack a mole on predictorsWhack a mole on predictors

Get a nice modelGet a nice model

Remembering why we walked into the swamp … oh yea, to predict future tons for agriculture products

Remembering why we walked into the swamp … oh yea, to predict future tons for agriculture products

Another approachAnother approach

• You can “lag” your predictors so that – for example - when you build your model, you associate July 2011 actual (response) with April of 2011 predictor value. If you have a good model, lagging allows you to predict future values without depending on “experts” to opine on future economic indicators.

Simple code to “lag” Simple code to “lag”

R has a

Built in

Lag function

If you want a copy of slides or code, just email me.

If you want a copy of slides or code, just email me.

Bill Yarberry

wayarberry@yahoo.com

Thanks.