Help with a calculation

hassan.mahfooz · May 25, 2016, 3:57pm

Please help me understand this calculation. My math and statistics is a bit rusty.

(ln Sales__t_ – ln Sales__t_–1) = b₀ + b₁(ln Sales_t_–1 – ln Sales_t_–2) + b₂(ln Sales_t_–4 – ln Sales_t__–5

If sales grew by 1 percent last quarter and by 2 percent four quarters ago, then the model predicts that sales growth this quarter will be 0.0121 – 0.0839 ln(1.01) + 0.6292 ln(1.02) = e^0.02372 – 1 = 2.40%

Institute, CFA. 2016 CFA Level II Volume 1 Ethical and Professional Standards and Quantitative Methods. CFA Institute, 07/2015. VitalBook file.

krokodilizm · May 25, 2016, 4:26pm

You know what to do

data_storm · May 25, 2016, 4:27pm

i guess you incorrectly missed the order… ln 1.01 is 0.01 and ln 1.02 is 0.0198 consequently, 0.0121 - (0.0839) (0.01) + (0.0198)(0.6292) the left side “before the summation” 0.0113 the right side “after the summation” 0.0125 hence, you got 0.0238, getting them to the exponent - 1 you get the value.

hassan.mahfooz · May 25, 2016, 4:28pm

What is that supposed to mean/

hassan.mahfooz · May 25, 2016, 4:48pm

I want to know why 1% growth is being converted in Ln 1.01

data_storm · May 25, 2016, 5:09pm

because this is a time series that exhibits a constant rate of growth.

Flashback · May 25, 2016, 5:36pm

You meant this manner…

[video:https://youtu.be/wUNBHTFYauQ]

krokodilizm · May 25, 2016, 6:01pm

Imagine that formula is the ball.

Flashback · May 25, 2016, 6:02pm

Don’t listen him, rather imagine that formula is the dog.