1. Forecasting Methods
ISAT 625
11/10/2018

2. 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
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3. 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?
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4. 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
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5. 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.
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6. Example: Unemployment rates1
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
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7. Exponential regression
Given a set of data in the forms
, find an equation of
the form to fit the data.
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