November 18, 2019

“Autos auto sales, when the predictors change a little

“Autos Sales” is one of the major producers of domestic
automobiles report sales monthly. These numbers are seasonally adjusted by the
U.S. Department of Commerce and are available to the public one to five
business days after the end of each month. 1 This is an important element to
the financial markets since it is highly correlated with consumer demands for
the market and car sales can express the changes in the economy precisely.

There is an old warning story named “boiled frog.” The
frog’s body temperature follows its surroundings. If you put the frog directly
in boiling water, it will sense the heat immediately and jump out. However,
when you heat the water slowly, the frog keeps adjusting to the rising
temperature. When the heat is too much for the frog to take, it is too late.

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The frog collapses and dies. 2 This theory can apply into economic as well. For
example, in a hamburger restaurant, if?the price for one hamburger change
from $5.49 to $5.99, it would not have many people noticed this change.

Therefore, it would not affect their sales a lot based on common sense.

Nevertheless, if the price for one hamburger changes from $5.99 to $6.99,
people will catch this change easily and the sales for the hamburger may
decrease due to the change in price. Various differences in auto sales share the
same situation here. For predictors which can use for estimating the change?in
auto sales, when the predictors change a little bit, auto sales may not shift
according to this adjustment and it will not be influenced by this. However, if
there is a big change in one predictor, then it will lead a change in auto
sales just as the “boiled frog” theory. Having a small change in predictors
seems like that putting a frog in and heating the water slowly, auto sales will
adjust itself and change a little bit to follow the changing trends in
predictors. On the other hand, if there is a big change in predictors, it looks
like that putting a frog directly in boiling water. In this way, auto sales
will follow this big change immediately and then be acted to such big change.

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Based on statistics studies, using first derivatives of
predictors to measure the level of change in each predictor is a good way to do
analysis.

With the new car sales changing a lot in the United States,
what affecting units of new car sales has become a topic of great interest to
researchers. As we can see from the plot below: Figure 1.1 Auto Car Sales
(With Smoothing)

There is a big downward change in year 2008. Since car sales
are an excellent indicator of the financial market, the reason may be financial
crisis. However, what specific factors affect units of car sales and how
sensitive of each one to units of car sales? This is an important direction to
let us explore. If we know what will lead a change in auto car sales, we are
able to know the market trend in order to have some accurate predictions. There
are many research articles about how to predict auto car sales by using gross
domestic product (GDP) to make prediction. Gross domestic product (GDP) is
defined by the Organisation for Economic Co-operation and

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