QMBU 301 Quantitative Methods in Business

Spring 2009

Assistant Prof. Dr. Özden Gür Ali

CASE-241, Tel: 212 338 1450,

Email: , homepage:

Overview

Managing a business requires making decisions under uncertainty – be it annual budgeting/hiring, investment, or weekly production decisions. This course introduces students to quantitative methods that facilitate objective and rational managerial decision making under uncertainty: Regression and forecasting techniques help analyze the data about past/current similar situations. The identified patternsare projected onto new situations to enable business decision making and planning.

Covered methods are time series forecasting techniques, regression and an overview of qualitative methods.We focus on forecasting techniques that have been most useful in business and administration problems. These include moving averages, exponential smoothing, decomposition methods, transformations, and regression with time series (autoregression, multiple regression, nonlinear transformations). Other methods are mentioned along with their advantages and disadvantages.

These methods are applied in business situations from different industries and functional areas.Drawing conclusions based on these analyses is emphasized. Computer based tools are used extensively.

Objectives

This course is designed to develop the quantitative skills required to make effective business decisions under uncertainty, specificallyto

  • identify the right method(s) for the situation
  • apply the methods correctly
  • use software tools to facilitate analyses
  • identify and choose variables
  • check for model appropriateness
  • assess validity of analyses

Textbooks:

Main Textbook:

“Business Forecasting”, by J. Hanke and D. Wichern, eighth edition, 2005

Supporting Text:

“Forecasting – Methods and Applications”, by S. Makridakis, S. Wheelwright, R. Hyndman, third edition, 1998

Lectures:

Lectures will include the discussion of methods, examples with business data, short cases from different industries and functional areas. Students are expected to have read and thought about how to approach the short cases indicated on the syllabus before coming to class. Class participation in lectures and case discussions contributes to students’ grades. A guest lecturer from the industry will provide an overview of their forecasting efforts. Students are required to attend this lecture which will be scheduled at a different time, combining both sections.

Study problems and Quizes:

Quizzes will be given regularly. They will be based on voluntary homeworks, which you are not required to return for grading. Homework assignments focus on applying the methods, evaluating their adequacy and recommendation of a course of action based on analyses. Students are required to take the quizzes in the section that they are registered in (otherwise the quiz will not be graded). There is absolutely no make-up for the quizzes.

Exams:

There will be two midterms and one final exam. You should expect the make-up exams to be no easier than the regular exams.

Labs and Software:

Students will use Excel to apply the data analysis methods learnt in class. They will first work through a familiar problem under guidance and then work on a similar assignment independently. The evaluation of lab performance will be based on attendance, and performance on the assigned problem. The labs will be held in SOS 180.

Teaching Assistants: TBA

Grading:

Midterm 120%

Midterm 220%

Final exam 30%

Lab sessions15%

Quizzes10%

Participation 5%

Total100%

Office hours:TBA.

Course webpage: accessible from KUAIS

Remarks:

1. Academic dishonesty is considered unacceptable within the University community, and it includes and is not limited to the following in the KU Code of conduct:

Cheating includes, but is not limited to, copying from a classmate or providing answers or information, either written or oral to others, in an examination or in the preparation of material subject to academic evaluation.

Plagiarism is borrowing or using someone else’s writing or ideas without giving written acknowledgement to the author. This includes copying from a fellow student’s paper or from a text or internet site without properly citing the source.

Multiple submission includes resubmission of the same work previously used in another course or project, without the permission of the instructor for both courses.

Collusion is getting unauthorized help from another person such as having someone else write one’s assignment, or having someone else take an exam with false identification. Impersonating a student in an examination is also considered a grave act of dishonesty.

Fabrication includes, but is not limited to, falsification or invention of any information or citation in an academic exercise.Facilitating academic dishonesty includes, but is not limited to, knowingly helping another student commit an act of academic misconduct (e.g., cheating, fabrication, plagiarism, multiple submissions).

2. Students are responsible for all announcements made in class and on courseweb

3. The class-room rules of conduct apply. The activities which are prohibited in class include and are not limited to:

  • Engaging in side conservations.
  • Using cell phones and other electronic devices.
  • Using laptops for purposes that are not course-related.
  • Arriving late or leaving early without the prior permission of the instructor.
  • Reading material, e.g., magazines, newspapers, novels etc., that are not course-related.
  • Working on personal activities or the assignments of other courses.
  • Interrupting the professor or other students.
  • Trashing the classroom.

Tentative Schedule:

DateTopicReading

Feb.10Introduction

12Review of basic statistical conceptsCh2

Describing data

Random variables and probability distributions

17Sampling

Hypothesis testing

Correlation

Cross sectional versus time series data

19Simple linear regressionCh 6

24Evaluation of regression

26Transformations

27Lab exercise-1 Introduction to data analysis with Excel

Mar.3Case 6-6: AAA Washingtonp 260

Multiple regression analysisCh 7

5Inference

Model building

10Diagnostics

Case 7-1: The Bond Marketp 310

12Time series data patternsCh 3 (57-73),

Autocorrelation, differencing

Case 3-2: Mr Tuxp 92

13Lab exercise-2 Regression and transformations

17Naive models, Moving averageCh. 4 (101-113)

Evaluating the accuracy and adequacy of the forecast

19Midterm 1

20Lab exercise- 3 Time series patterns

24Exponential smoothing – SimpleCh. 4 (114-131)

Choosing a forecasting methodCh. 3 (74- 84)

26Forecasting methods with for data with trend, Holt’s

Case 4.3 Consumer Credit Union

28 Lab exercise- 4 Time Series Forecast Accuracy Measures

31Winter’s exponential smoothing

Apr.2Decomposition MethodsCh5

Case 5-4: Murphy Brothers

3Lab exercise- 5 Exponential Smoothing

14Trend, Deseasonalization

Random Walk Model

Case 5-2: Mr Tux

16Time Series forecasting exercises

18Lab exercise- 6 Decomposition

21Business/Economic Indicators(p176-177)

28Regression with Time Series Ch8

Durbin Watson test(p327-342)

30Case 8-7: Alomega Food Storesp 375

Autoregressive modelsCh8 (p345-346)

May1Lab exercise- 7 Regression with Time Series

5Case 8-3: Restaurant Salesp 367

Introduction to ARIMA ModelsCh 9 (p386-389)

7Midterm 2

12Judgmental Forecasting and AdjustmentsCh. 10 Combining forecasts

14Managing the forecasting processCh 11

Case 11-4: Mr Tuxp 500

21Review