Beruflich Dokumente
Kultur Dokumente
Forecasting
MGS3100
Forecasting
Forecasting
Quantitative
Qualitative
Causal Model
Expert Judgment
Trend
Delphi Method
Time series
Grassroots
Stationary
Trend
Trend + Seasonality
Quantitative Forecasting
--Forecasting based on data and models
Casual Models:
Price
Population
Advertising
Causal
Model
Year 2000
Sales
Time Series
Model
Year 2000
Sales
Causal forecasting
Regression
Find a straight line that fits the data best.
Best line!
Intercept
XiYi
Xi Yi
2
X
i
( Xi ) 2
Techniques to try
Ways to evaluate
Data is reasonably
stationary
(no trend or seasonality)
MAD
MAPE
Standard Error
BIAS
Regression
Linear
Non-linear Regressions (not
covered in this course)
MAD
MAPE
Standard Error
BIAS
R-Squared
Classical decomposition
Find Seasonal Index
Use regression analyses to find
the trend component
MAD
MAPE
Standard Error
BIAS
R-Squared
7
MAD
Actual
MAPE
n
Nave Model
The simplest time series forecasting
model
Idea: what happened last time (last year,
last month, yesterday) will happen again
this time
Nave Model:
Algebraic: Ft = Yt-1
1
t
2
tn
=
n
F
t
Issues of MA Model
Nave model is a special case of MA with n = 1
Idea is to reduce random variation or smooth data
All previous n observations are treated equally (equal
weights)
Suitable for relatively stable time series with no trend or
seasonal pattern
12
14
15
Exponential Smoothing
Concept is simple!
Make a forecast, any forecast
Compare it to the actual
Next forecast is
Previous forecast plus an adjustment
Adjustment is fraction of previous forecast error
Essentially
Not really forecast as a function of time
Instead, forecast as a function of previous actual and
forecasted value
16
0 1
weight
Decreasing weights
given
to older
observations
(1 )
(1 ) 2
(1 ) 3
17
Toda
y
Ft Yt 1 (1 ) Ft 1
New forecast = weighted sum of last period
actual value and last period
forecast
: Smoothing constant
Ft :Forecast for period t
Ft-1:
Yt-1:
18
Seasonal
Variation dependent on the time of year
Each year shows same pattern
Cyclical
up & down movement repeating over long time frame
Each year does not show same pattern
20
Cycle
Trend
Random
movement
Time
Seasonal
pattern
Time
Demand
Time
Trend with
seasonal pattern
21
Time
Trend Model
Curve fitting method used for time series
data (also called time series regression
model)
Useful when the time series has a clear trend
Can not capture seasonal patterns
Linear Trend Model: Yt = a + bt
t is time index for each period, t = 1, 2, 3,
7
6
5
4
3
2
1
0
1
10
22
Intercept
23
24
Deseasonalized data
Deseasonalize
Forecast
Reseasonalize
25
26
Seasonal Index
Whats an index?
Ratio
SI = ratio between actual and average demand
Suppose
SI for quarter demand is 1.20
Whats that mean?
Use it to forecast demand for next fall
So, where did the 1.20 come from?!
27
28
Classical decomposition
Start by calculating seasonal indices
Then, deseasonalize the demand
Divide actual demand values by their SI values
y = y / SI
Results in transformed data (new time series)
Seasonal effect removed
Forecast
Regression if deseasonalized data is trendy
Heuristics methods if deseasonalized data is stationary
Reseasonalize with SI
29
30
Can you
describe general forecasting process?
compare and contrast trend, seasonality and
cyclicality?
describe the forecasting method when data is
stationary?
describe the forecasting method when data
shows trend?
describe the forecasting method when data
shows seasonality?
31