Forecasting

What is forecasting?

Estimating the future value of a variable e.g sales

Are forecasts always accurate?

They predict future events. Unstable external factors such as economic conditions, changing consumer taste and competitors make predictions uncertain. 

List 2 types of forecasting techniques

• Qualitative (personal judgement and business experiences)
• Quantitative (past data and statistical tools)- TIME SERIES ANALYSIS

What is time series analyis?

• Identifying a pattern in data (trend can be predicted)
• Set of values observed at regular intervals e.g annually, quarterly and daily

4 components of time series analysis

• Trend- overall, long-term movement
• Seasonal- regular periodic fluctuations within a 12-month period
• Cyclical- repeating movements over more than a year
• Random- erratic random fluctuations

What is a moving average?

A moving average is a technique for smoothing a data series to reveal trends by removing seasonal or cyclical flucuttations

What is extrapolation?

Taking an existing trend and projecting into the future

Define variance

Shows variability about the mean

Define standard deviation

it is a measure of how widely spread values are from the mean. The closer the data is bunched around the mean, the smaller the standard deviation

Standard deviation: FORMULA