Forecasting

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Forecasting

  1. 1. Forecasting Forecasting is the art of predicting the future value of a random variable(i.e., a variable with more than one possible outcome ) Jackwinder Singh Uppal
  2. 2. Used to try to predict the future
  3. 3. Uses two main methods • Qualitative – seeking opinions on which to base decision making. – Consumer panels, focus groups, etc • Quantitative – using statistical data to help inform decision making. – Identifying trends – Moving averages – seasonal, cyclical, random – Extrapolation - simple
  4. 4. Costs and Benefits of Forecasting: • Costs: – Data not always reliable or accurate – Data may be out of date – The past is not always a guide to the future – Qualitative data may be influenced by peer pressure – Difficulty of coping with changes to external factors out of the business’s control – e.g. economic policy, political developments (9/11?), natural disasters – hurricanes, earthquakes, etc.
  5. 5. Costs and Benefits of Forecasting: • Benefits: – Aids decision making – Informs planning and resource allocation decisions – If data is of high quality, can be accurate
  6. 6. Aim of forecasting • Aims to predict the future values of random variable as accurately as possible. • Preparation of forecast using all the relevant information available. • Effective decision making. • Change is constant, Forecasts help us by predicting these changes ahead of time.
  7. 7. Three approaches of forecasting Time series Econometrics analysis Combination of previous two + subjective judgement
  8. 8. Resort Forecasting • Identify the Variables • Do the data analysis/study • Do paperwork • Prepare forecast plans • Make Decisions • Implement/execute • Achieve desired results

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