Nevada's Gaming Revenues: Time Characteristics and Forecasting

The growing interest in gaming activity has led to an increased interest in Nevada's economy. Gross gaming revenues are regarded as an important economic indicator of the Nevada economy and of considerable importance to the State's budgetary planning since taxes derived from these revenues represent almost fifty percent of the general revenues in any given year. The major objective of this study is to identify the time varying characteristics of quarterly gaming revenues over a twenty-year period for the three most important economic areas within Nevada. This will provide the basis for developing a meaningful forecasting methodology. Examination of the gaming revenues for seasonal and non-seasonal fluctuations indicate that each area's revenues exhibited a consistent seasonal pattern and the amplitude of the seasonal fluctuation tended to diminish over time. No significant evidence of non-seasonal fluctuations such as business cycles could be found. Based on the time characteristics of the gaming revenues it was concluded that the autoregressive-moving average forecasting techniques suggested by Box and Jenkins would be the most appropriate forecasting methodology to employ. A Box-Jenkins model was estimated for each area over a period ending in 1974-IV and forecasts were generated for the period from 1975-I to 1977-IV. The forecasts were judged to be reasonably close to actual gaming revenues at least for the first 6 quarters of the forecast period.