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ML Academy

Forecasting

Interview question

  • midlevel
  • 10 minsuggested time
  • 2Data scientist, Data analyst

A marketing analyst finds that the weekly "cheap flights" search-interest index and weekly bookings, over 104 weeks, have a correlation of 0.95 (both series are simulated for this exercise). They propose using the index two weeks ahead as a leading driver in the bookings forecast and say the relationship "is clearly significant". What do you check before the index goes into a model, and what would you do?

Tests: Recognising spurious correlation between trending or random-walk series, using differencing and cross-correlation of stationary series, and validating a driver by out-of-sample forecast improvement.

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