Exam 2: Ch 3 Flashcards
Forecast
an estimate of the future level of some variable
Laws of forcasting
- Almost always wrong by some amount
- forecasts for the near term tend to be more accurate
- forecasts for groups of products or services tend to be more accurate
- forecasts are no substitute for calculated values
Quantitative forecasting methods
time series and causal models
- involves math
- used measurable, historical data
Qualitative forecasting methods
judgmental forecasts
- intuition
- used when data is scarce
Time series forecasting models
models that use a series of observations in chronological order to develop forecasts
causal forecasting models
models in which forecasts are modeled as a function of something other than time
Time Series
a time-ordered sequence of observations taken at regular intervals over a period of time
Last period forecast
the forecast for any period is the previous period’s actual value
Trend
a long term upward or downward movement in data
seasonality
short-term, fairly regular variations related to factors such as the calendar or time of day
cycle
wavelike variations lasting more than 1 year
irregular variations
caused by unusual circumstances, not reflective of typical behavior. their inclusion can distort the overall picture
random variation
residual variations after all the other behaviors are accounted for. chance variation.
Linear regression
a statistical technique that expresses a forecast variable as a linear function of some independent variable
Correlation
a measure between the strength and direction of a relationship between two variables
R^2 >= .80 good predictor
R^2 <= .25 poor predictor
- the higher the R^2 the better
