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Daily Cash Forecasting and Seasonal Resolution: Alternative Models and Techniques for Using the Distribution Approach

Tom W. Miller and Bernell K. Stone
The Journal of Financial and Quantitative Analysis
Vol. 20, No. 3 (Sep., 1985), pp. 335-351
DOI: 10.2307/2331034
Stable URL: http://www.jstor.org/stable/2331034
Page Count: 17
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Daily Cash Forecasting and Seasonal Resolution: Alternative Models and Techniques for Using the Distribution Approach
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Abstract

Daily cash forecasting generally requires some method to reflect day-of-month and day-of-week effects. It requires the resolution of multiple seasonals, a problem given scant treatment in the econometrics literature. This paper first presents multiplicative and mixed-effects specifications of day-of-month and day-of-week effects as alternatives to the additive specifications. Then, several important estimation issues pertinent to each specification are investigated, namely collinearity, holiday effects, length-of-month distortion, varying weekly-monthly pattern mix, and daily-monthly consistency. The paper develops a broad class of distribution-based linear forecasting models in great generality similar to the way that Box and Jenkins [1] provide a broad class of time-series models that can be specialized via parameter selection (specification). In our case, parameter selection (specification) gives particular members of the linear class of distribution models. A particular version can be tested against an alternative specification via hypothesis tests on model parameters.

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