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CFA Level 2
Quantitative Methods

Understanding Seasonal Components in Time-Series Analysis

Easy Time-series Analysis Seasonality

John runs a seasonal business selling ice cream. To improve his sales forecasting, he applies time-series analysis to historical sales data. After decomposing his time series, John discovers the seasonal component. He observes that ice cream sales tend to peak during the summer months and drop off significantly in winter.

Based on this analysis, he wants to understand how to adjust his sales forecasts to account for this seasonality. Specifically, he plans to use the seasonal indices derived from his data to modify his sales projections.

Which of the following statements accurately describes the seasonal component in his sales forecasting?

Hint

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