Forecasting Methods ISAT 625 11/10/2018.

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Presentation transcript:

Forecasting Methods ISAT 625 11/10/2018

Introduction What will be the state of your career and your personal life in five years? Forecasting is inevitable Forecasting is an essential input to decision making Government: population, GDP, Revenue Business: product demand, cash flow, profit Financial institutions: exchange rate, equity market 11/10/2018

Questions for Forecasting For what purposes are forecasts required? What quantities or events require prediction? What is the value of increased forecast accuracy? What information and resources are available as a basis for forecasting How can available information and resources be used? 11/10/2018

Forecasting Methods Regression methods Linear regression Polynomial regression Exponential regression Sinusoidal regression Exponential smoothing algorithms Simple exponential smoothing Holt’s linear trend algorithm Holt-Winters algorithm 11/10/2018

Linear Regression Problem Statement Assumptions Given a set of n pairs of observations on Dependent variable and independent variable , find an equation of the form Assumptions An assumption of linear dependence of on No relationship will be held precisely. 11/10/2018

Example: Unemployment rates 1 7.73 6.30 2 8.4 7.33 3 9.8 7.67 4 9.33 7.4 5 10.70 7.43 6 10.5 7 10.33 7.40 8 11.13 8.23 9 13.33 8.83 10 13.63 9.43 11/10/2018

Exponential regression Given a set of data in the forms , find an equation of the form to fit the data. 11/10/2018