Question

2. What are seasonal variations? How would you construct a seasonal index using ratio to
moving average method? What are the uses and limitations of seasonal indices?

Answer 1

The measurement of seasonal variation by using the ratio-to-moving-average method provides an index to measure the degree of the seasonal variation in a time series. The index is based on a mean of 100, with the degree of seasonality measured by variations away from the base.

Answer 2

Seasonal variation is defined as the variable element in the time period analysis and this helps in the method of forecasting the future.

Explanation:

• The seasonal index can be calculated by calculating the seasonal average of each year divided by its grand average.
• In this concept, the seasonal average is defined as the list of the seasonal indices that are calculated over a particular period of time.
• The grand average is defined as the total number of seasonal indices and is divided by the mean value.

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