FORECASTING PROJECT for
Almost Family, Inc. (AFAM)
BUS621 – Business Statistics
FP2
Team Eha
Bus 621 Almost Family Inc. Forecasting Project
Page 1
I.
Independent Variables
{This team mistakenly did not provide the descriptions and rationale of the variables under
consideration. This is a huge omission. Don’t make this mistake!}
II.
Data and Forecasts
The following table shows a compilation of independent economic variables that the group thinks will
have a bearing on the Y-value (quarterly revenues) for the forecast model. Each of these variables will
be tested on their correlation to each other and the strength by which they affect quarterly revenue
values.
Year Quarter
2006
2007
2008
2009
2010
2011
2012
2013
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Real Gross Medicare Quarterly
Gasoline Regular
Consumer
Revenues Domestic
Allowed
Real Disposable Grade Retail Price Incl Unemployment Price Index Commercial U.S. Prime
($Million) Product
Expenditures
Personal Income Taxes, U.S. Average
Rate (%)
(Index Employment Lending Rate Number of
($Billion)
($Billion)
($Billion)
($/gal)
Units)
(Millions)
(%)
Branches
$ 20.79
12,896
$18.60
9,535
2.34
4.7
1.99
89.3
7.43
115
$ 21.85
12,949
$20.10
9,619
2.85
4.6
2.01
89.6
7.9
115
$ 22.95
12,950
$19.40
9,665
2.84
4.6
2.03
90
8.25
115
$ 26.23
13,038
$19.70
9,792
2.26
4.4
2.02
90.4
8.25
115
$ 31.95
13,056
$19.30
9,836
2.37
4.5
2.04
91
8.25
115
$ 32.71
13,174
$20.80
9,851
3.02
4.5
2.07
91.3
8.25
115
$ 32.06
13,270
$20.10
9,890
2.85
4.7
2.08
91.4
8.18
115
$ 35.41
13,326
$20.40
9,944
2.97
4.8
2.1
91.7
7.52
115
$ 39.03
13,267
$20.20
10,087
3.11
5
2.13
91.8
6.21
115
$ 48.70
13,311
$21.70
10,288
3.76
5.3
2.16
91.5
5.08
115
$ 58.71
13,187
$21.00
10,054
3.85
6
2.19
91.1
5
123
$ 66.17
12,884
$21.30
10,048
2.30
6.9
2.14
90.1
4.06
124
$ 69.20
12,711
$21.40
9,927
1.89
8.3
2.12
88.8
3.25
124
$ 74.85
12,701
$23.10
9,916
2.32
9.3
2.13
87.8
3.25
124
$ 76.29
12,747
$22.30
9,760
2.57
9.6
2.15
87.5
3.25
126
$ 77.51
12,873
$22.70
9,746
2.60
9.9
2.17
87.3
3.25
126
$ 81.78
12,948
$23.40
9,882
2.71
9.8
2.17
87.3
3.25
126
$ 85.61
13,020
$25.20
10,034
2.81
9.6
2.17
87.6
3.25
126
$ 84.90
13,104
$24.30
10,063
2.72
9.5
2.18
87.9
3.25
126
$ 84.64
13,181
$24.70
10,087
2.88
9.6
2.2
88.3
3.25
127
$ 82.59
13,184
$24.50
10,196
3.30
9
2.22
88.7
3.25
128
$ 81.72
13,265
$26.40
10,158
3.80
9
2.25
89.2
3.25
128
$ 86.21
13,307
$25.50
10,126
3.63
9.1
2.26
89.5
3.25
166
$ 89.33
13,441
$26.00
10,122
3.37
8.7
2.27
90
3.25
166
$ 89.95
13,506
$25.90
10,214
3.61
8.3
2.28
90.5
3.25
166
$ 86.89
13,549
$27.90
10,292
3.72
8.2
2.29
90.8
3.25
166
13,598
$27.00
10,316
3.67
8.1
2.3
91.2
3.2
166
13,646
$27.40
10,342
3.56
7.8
2.32
91.6
3.33
166
13,706
$21.00
10,388
3.41
7.7
2.32
92
3.34
166
13,761
$22.60
10,456
3.54
7.8
2.32
92.4
3.31
166
With the exception of Number of Branches, the above data and forecasts were obtained from the
following sources:
Bus 621 Almost Family Inc. Forecasting Project
Page 2
Column D
Column E
Column F
Column H
Column I
Column J
Column K
Column L
Real Gross Domestic Product ($Billion)
Bureau of Economic Analysis/Global Insight - http://www.eia.gov/forecasts/steo/query/
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/SustainableGRatesConFact/Downloads/sgr2013p.pdf
M. Kent Clemens, F.S.A.
Centers for Medicare & Medicaid Services
Office of the Actuary
N3-26-04
Centers for Medicare & Medicaid Services
Baltimore, MD 21244
Bureau of Economic Analysis/Global Insight - http://www.eia.gov/forecasts/steo/query/
EIA Weekly Petroleum Status Report - http://www.eia.gov/forecasts/steo/query/
http://data.bls.gov/timeseries/LNS14000000
Medicare Quarterly Allowed Expenditures ($Billion)
Real Disposable Personal Income ($Billion)
Gasoline Regular Grade Retail Price Incl Taxes, U.S. Average ($/gal)
Unemployment Rate (%)
Consumer Price Index (Index Units)
Commercial Employment (Millions)
U.S. Prime Lending Rate (%)
Bureau of Labor Statistics/Global Insight - http://www.eia.gov/forecasts/steo/query/
Bureau of Labor Statistics/Global Insight - http://www.eia.gov/forecasts/steo/query/
Federal Reserve Board/Global Insight - http://www.eia.gov/forecasts/steo/query/
Number of Branches data was obtained form the Almost Family Inc Website
http://www.patientcare.com/press_releases.php and the forecast was obtained by analyzing company
earnings reports which indicated no plans for expansion in the next four quarters hence we expect the
number of branches to remain constant at 166.
III.
Viability of Variables
a. Correlation Matrix
Multicollinearity is a statistical phenomenon in which two or more predictor variables in a multiple
regression model are highly correlated. This was initially measured using the correlation matrix model
and any pair of variables with correlation larger than ±0.9 indicates a strong relationship so one of the
pair of variables will be deleted to resolve the issue of multicollinearity. Another measure of
multicollinearity is the Variance Inflation Factor (VIF) which the group will utilize as well. Correlation
results for AFAM variables are as follows:
Correlation Matrix
Revenues ($Million)
Real Gross Domestic Product ($Billion)
Medicare Quarterly Allowed Expenditures ($Billion)
Real Disposable Personal Income ($Billion)
Gasoline Regular Grade Retail Price Incl Taxes,
U.S. Average ($/gal)
Unemployment Rate (%)
Consumer Price Index (Index Units)
Commercial Employment (Millions)
U.S. Prime Lending Rate (%)
Number of Branches
Revenues
($Million)
1.000
.168
.901
.631
.295
.944
.895
-.557
-.965
.690
Medicare
Real
Gasoline
Real Gross
Quarterly Disposable
Regular Grade
U.S.
Domestic
Allowed
Personal Retail Price Incl
Consumer Commercial
Prime
Product Expenditures
Income
Taxes, U.S. Unemployment Price Index Employment Lending Number of
($Billion)
($Billion)
($Billion) Average ($/gal)
Rate (%) (Index Units)
(Millions) Rate (%) Branches
1.000
.454
.679
1.000
.709
1.000
.810
-.097
.543
.589
-.018
.541
.524
.794
.917
-.353
-.815
.797
.669
.381
.829
.203
-.574
.554
26 sample size
± .388 critical value .05 (two-tail)
± .496 critical value .01 (two-tail)
1.000
.079
.648
.369
-.219
.496
1.000
.729
-.788
-.942
.523
1.000
-.174
-.831
.798
1.000
.616
-.064
1.000
-.590
1.000
Highly Correlated Data
Medicare Quarterly Allowed Expenditures & Consumer Price Index
Unemployment Rate & US Prime Lending Rate
Highly correlated independent variables are highlighted in yellow. These are: Consumer Price Index with
Medicare Quarterly Allowed Expenditures, and Unemployment Rate with U.S. Prime Lending Rate. To
address the multicollinearity between these pairs of variables, we will initially remove Consumer Price
Index (CPI) and Unemployment Rate (UR) from the data set. These were chosen because they have the
Bus 621 Almost Family Inc. Forecasting Project
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lowest correlation with revenue and somewhat high correlations with many other variables. This leaves
us with five variables that have at least 95% confidence of non-zero correlation (because the sample
correlation greater than the critical value of +/- .388) and not too high correlations with other variables.
We note two of the remaining variables have sample correlation greater than .9 or less than -.9. All the
variables are easily of confidently forecasted.
1.
Bus 621 Almost Family Inc. Forecasting Project
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