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Chapter 7: Forecasting

Chapter 7: Forecasting. Quantitative Decision Making with Spreadsheet Applications 7 th ed. By Lapin and Whisler Sections 7.1-7.2. Three broad categories. Forecasting Using Past Data Forecasting Using Causal Models Forecasting Using Judgement. Time Series.

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Chapter 7: Forecasting

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  1. Chapter 7: Forecasting Quantitative Decision Making with Spreadsheet Applications 7th ed. By Lapin and Whisler Sections 7.1-7.2

  2. Three broad categories • Forecasting Using Past Data • Forecasting Using Causal Models • Forecasting Using Judgement

  3. Time Series • A time series is a set of observations of a variable measured at successive (equally spaced) intervals of time. • Objective: discover a pattern in past data and extrapolate into the future. • Based solely on historical data

  4. Example • Goal: Predict sales volume of a product • To use time series: Collect a large amount of data on past sales. Try to identify a trend that might help predict future sales.

  5. Classical Time Series Model • Yt= Tt·Ct·St·It • Tt: The trend component • Ct: The cyclic component • St: The seasonal component • It: The irregular component

  6. Trend

  7. Cyclic Component

  8. Seasonal

  9. Irregular Component

  10. Single Parameter Exponential Smoothing

  11. Practice…..

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