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Normalizing A Seasonal Index The Sum of

This document discusses how to normalize seasonal indices. Seasonal indices should sum to the total number of indices and have an average of 1, but errors in calculation cause these values to be off. Normalizing the indices involves dividing each index by the overall average, which corrects the errors and forces the sum to the total number and average to 1. An example is provided where 4 quarterly indices are normalized by dividing each by the original average value.

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3K views1 page

Normalizing A Seasonal Index The Sum of

This document discusses how to normalize seasonal indices. Seasonal indices should sum to the total number of indices and have an average of 1, but errors in calculation cause these values to be off. Normalizing the indices involves dividing each index by the overall average, which corrects the errors and forces the sum to the total number and average to 1. An example is provided where 4 quarterly indices are normalized by dividing each by the original average value.

Uploaded by

api-25888404
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Normalizing a Seasonal Index

The sum of the Seasonal indices should sum to the number of indices you have.
For instance, in the Coal example there are 4 seasonal indices, so when you add
them all up, they should sum to 4. However, because of errors in the way
seasonal indices are calculated the sum will always be slightly off. The average
of the seasonal indices should be 1, but because of errors in the way seasonal
indices are calculated the average will always be slightly off.

Normalized
Seasonal Seasonal
Index Index

Q1 1.108239 1.112305
Q2 0.783523 0.786397
Q3 0.859847 0.863002
Q4 1.23377 1.238296

Sum 3.98538 4.00000


Average 0.996345 1.00

Normalizing the Seasonal Index corrects this error and forces the sum to total the
number of seasonal indices and the average to always be 1. To normalize the
seasonal indices, you will divide each index by the average index. For instance,
in the above table I normalized the seasonal index for Q1 as follows:

1.108239 / 0.996345.

F G H
3 Normalized
4 Seasonal Seasonal
5 Index Index
6
7 Q1 =AVERAGE(C7:C14) =G7/G$12
8 Q2 =AVERAGE(C17:C24) =G8/G$12
9 Q3 =AVERAGE(C26:C33) =G9/G$12
10 Q4 =AVERAGE(C35:C42) =G10/G$12
11
12 =AVERAGE(G7:G10) =AVERAGE(H7:H10)

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