Forecasting Methods

Question 1

True or False

This forecast equation is part of the Holt’s method:

Ŷ_t+p = (L_t + pT_t) S_t-s+p

Answer 1

False.

This forecast equation is the Winter’s method, which is an extension to the Holt’s method equation.

This equation allows for both trend and seasonal patterns.

Question 2

When Ŷ_t+1 = Y_t, what type of forecasting method is being used?

Answer 2

Naive forecasting method.

This method uses the last period’s (Y_t) actuals as the current period’s (Ŷ_t+1) forecast.

Question 3

What is the Naive forecasting method?

Answer 3

This method of forecasting uses the last period’s actuals as the current period’s forecast, without adjustment or attempt to establish causal factors.

Question 4

When using a Naive forecasting method to determine a forecast value that is beyond the time for which we have data available, what approach can we take?

Answer 4

Based on a Naive forecasting method, regardless of which time period we’re trying to forecast, we can always use the last known actual value as the forecasted value for a future time period.