Everything about Forecast totally explained
Forecasting is the process of
estimation in unknown situations.
Prediction is a similar, but more general term. Both can refer to estimation of
time series,
cross-sectional or
longitudinal data. Usage can differ between areas of application: for example in
hydrology, the terms "forecast" and "forecasting" are sometimes reserved for estimates of values at certain specific
future times, while the term "prediction" is used for more general estimates, such as the number of times floods will occur over a long period.
Risk and
uncertainty are central to forecasting and prediction. Forecasting is used in the practice of
Customer Demand Planning in every day business forecasting for manufacturing companies. The discipline of demand planning, also sometimes referred to as supply chain forecasting, embraces both statistical forecasting and a consensus process.
Forecasting is commonly used in discussion of time-series data.
Categories of forecasting methods
Time series methods
Time series methods use historical data as the basis of estimating future outcomes.
Causal / econometric methods
Some forecasting methods use the assumption that it's possible to identify the underlying factors that might influence the variable that's being forecast. For example, sales of umbrellas might be associated with weather conditions. If the causes are understood, projections of the influencing variables can be made and used in the forecast.
Regression analysis using linear regression or non-linear regression
Autoregressive moving average (ARMA)
Autoregressive integrated moving average (ARIMA) » for example Box-Jenkins
Econometrics
Judgemental methods
Judgemental forecasting methods incorporate intuitive judgements, opinions and probability estimates.
Composite forecasts
Surveys
Delphi method
Scenario building
Technology forecasting
Forecast by analogy
Other methods
Simulation
Prediction market
Probabilistic forecasting and Ensemble forecasting
Reference class forecasting
Forecasting accuracy
The forecast error is the difference between the actual value and the forecast value for the corresponding period.
where E is the forecast error at period t, Y is the actual value at period t, and F is the forecast for period t.
Measures of aggregate error:
| Mean Absolute Error (MAE) |
MAE = frac |
Please note that the business forecasters and demand planners in the industry refer to the PMAD as the MAPE, although they compute this volume weighted MAPE. Difference between MAPE and WMAPE is explained in Calculating Demand Forecast Accuracy
See also
Forecast error
Calculating Demand Forecast Accuracy
Predictability
Prediction interval, similar to confidence interval
Applications of forecasting
Forecasting has application in many situations:
Supply chain management
Weather forecasting, Flood forecasting and Meteorology
Transport planning and Transportation forecasting
Economic forecasting
Technology forecasting
Earthquake prediction
Land use forecasting
Product forecasting
Player and team performance in sports
Telecommunications forecastingFurther Information
Get more info on 'Forecast'.
|
External Link Exchanges
Do you know how hard it is to get a link from a large encyclopaedia? Well we're different and will prove it. To get a link from us just add the following HTML to your site on a relevant page:
<a href="http://forecasting.totallyexplained.com">Forecasting Totally Explained</a>
Then simply click through this link from your web page. Our crawlers will verify your link, extract the title of your web page and instantly add a link back to it. If you like you can remove the words Totally Explained and embed the link in article text.
As long as your link remains in place, we'll keep our link to you right here. Please play fair - our crawlers are watching. Your site must be closely related to this one's topic. Any kind of spamming, dubious practises or removing the link will result in your link from us being dropped and, potentially, your whole site being banned. |
