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forecasting data points through polynomial trend line

  1. #1
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    06-27-2011
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    Germantown, Maryland
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    Excel 2003
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    forecasting data points through polynomial trend line

    Alright here is my trend line equation for my polynomial forecast

    y= -6E-09x4 + 2E-06x3 - 0.0001x2 + 0.004x + 0.0268

    The period which I am forecasting is x=126

    I am trying to forecast the unemployment rate and instead of using dates, I am using numerical values for quarters.. Hence 126= June 2011

    When I inserted the equation into excel I got 1.431667744

    Which makes absolutely no sense because the unemployment rate cannot be 143% i June 2011... Is my formula wrong..

    The formula I put into excel was

    = ((-0.000000006*POWER(A127, 4) + 0.000002*POWER(A127, 3) - 0.0001*POWER(A127, 2) + 0.004*A127 + 0.0268))


    Any help is greatly appreciated... I have been stuck all day trying to figure this out and I have this project due in 2 days

  2. #2
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    06-26-2010
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    Austin, TX
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    Excel 2010
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    Re: forecasting data points through polynomial trend line

    Is this the trend line provided by Excel or one you calculated yourself? If done by Excel, I assume you charted the data. Does the trend line on the graph show such a high upward trend? Even at quarter 50 the forecast calculates to 18.9% unemployment. Trendlines can only go so far, especially with many slope changes (a polynomial with the fourth power can 'handle' 3 slope changes).

    Pauley

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