Forecasting

Dr. A. Ramesh

Dr. A. Ramesh

Example
Year 2008 2009 2010 2011 2012 2013 2014 Demand 25 32 24 28 26 27 ??

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Values given by students

1. 2. 3. 4. 5. 6. 7. 8.
Average 27 26.25 Average of last four values increase based on last 2 values 28 30 based on other factor like growth of population and buying power Increasing and decreasing trend 26 27 Average of last three values 26.833 weighted average on last three values. Weights are 1,2,3 removing outlier then finding average 32
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Explanation contd.
Level or constant model, no trend F = a + (noise) Method 1 Simple average
(0,
2

Equal weightage Consider all elements

Method 2 weighted average

Difficulty in giving weights

Method 3 k period moving average Method 4 k period weighted moving average

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Time Series Data

Causal model

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Exponential smoothing

F(t+1) = Dt +(1- )Ft

Alpha = 0.2

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Regression model
26,28,29,31,32,35

a=24.26 b=1.6857

Dr. A. Ramesh