Escolar Documentos
Profissional Documentos
Cultura Documentos
FORECASTING
Reference Material
BUSINESS FORECASTING
Time Series:
A collection of observations or data made sequentially in time.
A dataset consisting of observations arranged in chronological order
Forecast:
An estimate of the future value of some variable
Example:
The number of 2 wheeler sales in Bangalore during next month
The average volume of an airline passengers in the next quarter
Reference Material
BUSINESS FORECASTING
Time Series Plot:
Month
1
2
3
4
5
6
7
8
9
10
Demand
139
137
174
142
141
162
180
164
171
206
Month
11
12
13
14
15
16
17
18
19
20
Demand
193
207
218
229
225
204
227
223
242
239
Demand
250
200
150
100
50
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Month
Reference Material
BUSINESS FORECASTING
Trend:
190.00
170.00
150.00
130.00
110.00
90.00
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
GDP
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Year
Reference Material
BUSINESS FORECASTING
Seasonal Pattern:
The time series data exhibiting rises and falls influenced by seasonal factors
Example: The data on monthly sales of a branded jackets
Month
Sales
Month
Sales
Month
Sales
Month
Sales
Jan-02
164
Jan-03
147
Jan-04
139
Jan-05
151
Feb-02
148
Feb-03
133
Feb-04
143
Feb-05
134
Mar-02
152
Mar-03
163
Mar-04
150
Mar-05
164
Apr-02
144
Apr-03
150
Apr-04
154
Apr-05
126
May-02
155
May-03
129
May-04
137
May-05
131
Jun-02
125
Jun-03
131
Jun-04
129
Jun-05
125
Jul-02
153
Jul-03
145
Jul-04
128
Jul-05
127
Aug-02
146
Aug-03
137
Aug-04
140
Aug-05
143
Sep-02
138
Sep-03
138
Sep-04
143
Sep-05
143
Oct-02
190
Oct-03
168
Oct-04
151
Oct-05
160
Nov-02
192
Nov-03
176
Nov-04
177
Nov-05
190
Dec-02
192
Dec-03
188
Dec-04
184
Dec-05
182
Reference Material
BUSINESS FORECASTING
Seasonal Pattern:
The time series data exhibiting rises and falls influenced by seasonal factors
Time Series Plot
190
150
130
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
90
Apr-02
110
Jan-02
Sales
170
Month
Reference Material
BUSINESS FORECASTING
Cyclic Pattern:
The time series data exhibiting rises and falls that are not of a fixed period
Examples: The sales of products such as automobiles, steel, etc. These are due to
economic fluctuations
The time series data may include a
combination of trend, seasonal,
cyclic patterns
Example: The data on monthly sales of
an Operating System is given
below:
Month
Sales
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
742
697
776
898
1030
1107
1165
1216
1208
1131
971
783
741
700
774
932
1099
1223
1290
1349
Month
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
Sales
Month
Sales
1341
41
1274
1296
42
1422
1066
43
1486
901
44
1555
896
45
1604
793
46
1600
885
47
1403
1055
48
1209
1204
49
1030
1326
50
1032
1303
51
1126
1436
52
1285
1473
53
1468
1453
54
1637
1170
55
1611
1023
56
1608
951
57
1528
861
58
1420
938
59
1119
1109
60
1013
Reference Material
BUSINESS FORECASTING
58
55
52
49
46
43
40
37
34
31
28
25
22
19
16
13
10
1800
1600
1400
1200
1000
800
600
400
200
0
Operating System
Month
Reference Material
BUSINESS FORECASTING
Accuracy Measure
Mean Absolute Deviation: MAD
Mean Square Deviation: MSD
Mean Absolute Percentage Error: MAPE
Reference Material
BUSINESS FORECASTING
Example: The data on Yearly average of Indian GDP during 1993 to 2005. The
predicted values using a suitable forecasting method is also given.Check
the forecast accuracy using MAD, MSD & MAPE?
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Reference Material
BUSINESS FORECASTING
Mean Absolute Deviation: MAD
Step 1: Calculate Error
Error = Actual - Predicted
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
-0.07
-0.36
0.50
-1.72
-1.41
-1.18
-2.92
-2.21
-3.92
2.27
6.76
Reference Material
BUSINESS FORECASTING
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
-0.07
-0.36
0.50
-1.72
-1.41
-1.18
-2.92
-2.21
-3.92
2.27
6.76
Absolute (Error)
3.42589
0.83500
0.07407
0.36394
0.49653
1.71579
1.41423
1.18090
2.91788
2.20677
3.91918
2.27388
6.76142
Reference Material
BUSINESS FORECASTING
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
-0.07
-0.36
0.50
-1.72
-1.41
-1.18
-2.92
-2.21
-3.92
2.27
6.76
Absolute (Error)
3.42589
0.83500
0.07407
0.36394
0.49653
1.71579
1.41423
1.18090
2.91788
2.20677
3.91918
2.27388
6.76142
MAD = 2.12
Reference Material
BUSINESS FORECASTING
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
-0.07
-0.36
0.50
-1.72
-1.41
-1.18
-2.92
-2.21
-3.92
2.27
6.76
Reference Material
BUSINESS FORECASTING
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
-0.07
-0.36
0.50
-1.72
-1.41
-1.18
-2.92
-2.21
-3.92
2.27
6.76
Error Square
11.73675
0.69722
0.00549
0.13245
0.24654
2.94393
2.00006
1.39452
8.51401
4.86985
15.35998
5.17053
45.71683
Reference Material
BUSINESS FORECASTING
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
-0.07
-0.36
0.50
-1.72
-1.41
-1.18
-2.92
-2.21
-3.92
2.27
6.76
Error Square
11.73675
0.69722
0.00549
0.13245
0.24654
2.94393
2.00006
1.39452
8.51401
4.86985
15.35998
5.17053
45.71683
MSD = 7.60
Reference Material
BUSINESS FORECASTING
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted Abs(Error)
91
3.43
99.165
0.83
107.329
0.07
115.494
0.36
123.659
0.50
131.824
1.72
139.989
1.41
148.154
1.18
156.319
2.92
164.484
2.21
172.649
3.92
180.814
2.27
188.979
6.76
Reference Material
BUSINESS FORECASTING
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
0.07
0.36
0.50
1.72
1.41
1.18
2.92
2.21
3.92
2.27
6.76
% Error
3.62813
0.83500
0.06906
0.31611
0.39992
1.31874
1.02056
0.80348
1.90212
1.35988
2.32276
1.24196
3.45428
Reference Material
BUSINESS FORECASTING
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
0.07
0.36
0.50
1.72
1.41
1.18
2.92
2.21
3.92
2.27
6.76
% Error
3.62813
0.83500
0.06906
0.31611
0.39992
1.31874
1.02056
0.80348
1.90212
1.35988
2.32276
1.24196
3.45428
MAPE = 1.437
Reference Material
BUSINESS FORECASTING
BUSINESS FORECASTING
Prediction Interval
Prediction interval : Predicted value z MSD
where z = width of prediction interval
Prediction Interval
90%
1.645
95%
1.960
99%
2.576
Reference Material
BUSINESS FORECASTING
Prediction Interval
Example: The data on Yearly average of Indian GDP during 1993 to 2005. The
predicted values using a suitable forecasting method is also
given.Calculate 95% prediction interval
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Reference Material
BUSINESS FORECASTING
Prediction Interval
Example: The data on Yearly average of Indian GDP during 1993 to 2005. The
predicted values using a suitable forecasting method is also
given.Calculate 95% prediction interval
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Predicted
91
99.165
107.329
115.494
123.659
131.824
139.989
148.154
156.319
164.484
172.649
180.814
188.979
Error
3.43
0.83
0.07
0.36
0.50
1.72
1.41
1.18
2.92
2.21
3.92
2.27
6.76
Square Error
11.73675
0.69722
0.00549
0.13245
0.24654
2.94393
2.00006
1.39452
8.51401
4.86985
15.35998
5.17053
45.71683
MSD
7.60
MSD
2.76
1.96
Prediction Interval
5.40
Reference Material
BUSINESS FORECASTING
Prediction Interval
Example: The data on Yearly average of Indian GDP during 1993 to 2005. The
predicted values using a suitable forecasting method is also
given.Calculate 95% prediction interval
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Prediction Interval
Predicted Lower Limit
91
85.597
99.165
93.762
107.329
101.926
115.494
110.091
123.659
118.256
131.824
126.421
139.989
134.586
148.154
142.751
156.319
150.916
164.484
159.081
172.649
167.246
180.814
175.411
188.979
183.576
Upper Limit
96.403
104.568
112.732
120.897
129.062
137.227
145.392
153.557
161.722
169.887
178.052
186.217
194.382
MSD
7.60
MSD
2.76
1.96
Prediction Interval
5.40
Reference Material
BUSINESS FORECASTING
Prediction Interval
Example:The data on shipments over a periods of time in the chronological
order is given below with the forecasted values. Provide 95%
prediction interval?
Shipments Forecast
115
89.167
132
112.212
141
135.258
154
158.303
171
181.348
180
204.394
204
227.439
228
250.485
247
273.53
291
296.576
337
319.621
391
342.667
Reference Material
BUSINESS FORECASTING
Shipments
115
132
141
154
171
180
204
228
247
291
337
391
Reference Material
BUSINESS FORECASTING
Shipments
115
132
141
154
171
180
204
228
247
291
337
391
(115+132+141)/3
(132+141+154)/3
(247+291+337)/3
(291+337+391)/3
129.33
142.33
155.33
168.33
185.00
204.00
226.33
255.33
291.67
339.67
MAD
49.48
MSD
3080.79
MAPE
19.12
Reference Material
BUSINESS FORECASTING
Reference Material
BUSINESS FORECASTING
Year
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Income (Million $)
46.163
46.998
47.816
48.311
48.758
49.164
49.548
48.915
50.315
50.768
Reference Material
BUSINESS FORECASTING
Reference Material
BUSINESS FORECASTING
Example:The data on Yearly average of Indian GDP during 1993 to 2005 is given
below. Develop a forecasting model for predicting GDP. Predict the GDP for
2006 & 2007
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP
94.43
100.00
107.25
115.13
124.16
130.11
138.57
146.97
153.40
162.28
168.73
183.09
195.74
Reference Material
BUSINESS FORECASTING
Example:The data on Yearly average of Indian GDP during 1993 to 2005 is given
below. Develop a forecasting model for predicting GDP. Predict the GDP for
2006 & 2007
Time Series Plot
190.00
150.00
130.00
110.00
90.00
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
GDP
170.00
Year
Reference Material
BUSINESS FORECASTING
Trend line Method
Example:The data on Yearly average of Indian GDP during 1993 to 2005 is given
below. Develop a forecasting model for predicting GDP.
Trend Analysis Plot for GDP
Linear Trend Model
Yt = 82.8346 + 8.16495*t
200
Variable
Actual
Fits
180
Accuracy
MAPE
MAD
MSD
GDP
160
Measures
1.43774
2.12365
7.60320
140
120
100
1
7
8
Index
10
11
12
13
Reference Material
where 0 1 and S1 = y1
Reference Material
Amount
9
8
9
12
9
12
Month
7
8
9
10
11
12
Amount
11
7
13
9
11
10
Reference Material
Amount
9
8
9
12
9
12
11
7
13
9
11
10
Forecasts
9.00
8.87
8.89
9.29
9.25
9.61
9.79
9.43
9.89
9.78
9.94
Forecast of y2 = y1 = 9.00
Forecast of y3 = .y2 + (1- ) (y2 Forecast) = 0.13 x 8 + (1 0.13) x 9 = 8.87
Reference Material
Step 1:
Choose = 0.1
Step 2:
Forecast Values
Step 3:
Calculate Errors
Step 4:
Calculate SSE and MSE
Step 5:
Repeat steps 1 to 4 for different values of
Step 6:
Choose the with minimum MSE
Reference Material
Amount
9
8
9
12
9
12
Month
7
8
9
10
11
12
Amount
11
7
13
9
11
10
Reference Material
Data
6.4
5.6
7.8
8.8
11
11.6
16.7
15.3
21.6
22.4
Reference Material
Data
6.4
5.6
7.8
8.8
11
11.6
16.7
15.3
21.6
22.4
Forecast
6.4
6.16
6.65
7.30
8.41
9.37
11.57
12.69
15.36
Reference Material
Data
Forecast
10
5
0
1
10
Reference Material
Step 6:
Choose the & with minimum MSE
Reference Material
Data
6.4
5.6
7.8
8.8
11
11.6
16.7
15.3
21.6
22.4
Reference Material
Reference Material
Example: The data daily revenues is given below. Calculate the order of MA
process to forecast future revenues?
SL No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Data
11.9
11.94
11.69
11.86
12.69
11.95
11.9
12.08
12.03
11.99
12.11
11.98
11.71
11.87
12.12
SL No
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Data
15.28
9.33
12.54
12.07
12.08
12.26
12.03
12.04
11.93
12.02
12.27
12.07
11.77
12.16
12.26
SL No
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
Data
11.51
12.56
12.2
12.38
12.46
12.21
11.83
12.08
11.48
11.63
12.68
11.93
13.7
13.95
11.5
Reference Material
Step 1:
Total number of values N = 45
20 % of N = k = 0.2 x 45 = 9
Step 2:
Calculate auto correlation coefficients upto lag k
Reference Material
Yt
11.9
11.94
11.69
11.86
12.69
11.95
11.9
12.08
12.03
11.99
12.11
11.98
11.71
11.87
12.12
15.28
9.33
12.54
12.07
12.08
12.26
12.03
12.04
Yt-1
11.94
11.69
11.86
12.69
11.95
11.9
12.08
12.03
11.99
12.11
11.98
11.71
11.87
12.12
15.28
9.33
12.54
12.07
12.08
12.26
12.03
12.04
11.93
SL No.
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
Yt
11.93
12.02
12.27
12.07
11.77
12.16
12.26
11.51
12.56
12.2
12.38
12.46
12.21
11.83
12.08
11.48
11.63
12.68
11.93
13.7
13.95
11.5
Yt-1
12.02
12.27
12.07
11.77
12.16
12.26
11.51
12.56
12.2
12.38
12.46
12.21
11.83
12.08
11.48
11.63
12.68
11.93
13.7
13.95
11.5
Reference Material
Lag
1
2
3
4
5
6
7
8
9
Step 3: Calculate 95 % Upper & Lower Confidence limits for auto correlation
coefficients
Upper Limit = 2 / N = 2 / 45 = 0.2981
Lower limit = -2 N = -2 / 45 = -0.2981
Reference Material
Step 6:
Choose the with minimum MSE
Reference Material
Example: The data daily impressions per page given below. Calculate the order of
AR process to forecast future revenues?
SL No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Data
259
310
268
379
275
102
139
60
93
45
101
161
288
372
291
SL No.
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Data
416
248
314
351
417
276
164
120
379
277
208
361
289
138
206
Reference Material
Example: The data daily impressions per page given below. Calculate the order of
AR process to forecast future revenues?
SL No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Data
259
310
268
379
275
102
139
60
93
45
101
161
288
372
291
SL No.
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Data
416
248
314
351
417
276
164
120
379
277
208
361
289
138
206
Reference Material
Step 1:
Total Number of Values N = 30
20 % of N = 6
Step 2:
Calculate auto correlation coefficients upto lag 6
Reference Material
Step 3:
Reference Material
Where R =
r1
r2
---
r p-1
r1
r1
---
r p-2
r2
r1
---
r p-3
r p-1
r p-2
r p-3
---
= (1 2 - - - p)T
Reference Material
Where R =
0.522
0.268
0.169
0.019
-0.197
0.522
0.522
0.268
0.169
0.019
0.268
0.522
0.522
0.268
0.169
0.169
0.268
0.522
0.522
0.268
0.019
0.169
0.268
0.522
0.522
-0.197
0.019
0.169
0.268
0.522
Reference Material
R-1 =
1.478227
-0.74363
0.011259
-0.14324
-0.0125
0.348349
r=
0.479115
-0.00634
0.106117
0.007863
-0.18514
-0.10022
Step 4:
Calculate 95 % Confidence Limits on partial auto correlation coefficients
Upper limit = 2 / N = 2 / 30 = 0.3651
Lag
1
2
3
4
5
6
Reference Material
Step 6:
Choose the with minimum MSE
Reference Material
Where zt = yt yt estimate
Estimation of order of Process
Identify the order of MA (number of s ) using auto correlation coefficients
Identify the order of AR (number of s ) using Yule Walker equations
Estimation parameters
Estimate the best values of s and s by minimizing MSE
Reference Material
Estimation parameters
Estimate the best values of s and s by minimizing MSE
Reference Material
Exercise: The data one daily impression is given below. Fit a suitable ARIMA
model to forecast the impressions for the future?
SL No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Data
2719
2713
2612
3163
2300
1551
1823
1371
1548
1314
1568
1917
2697
3120
2595
SL No
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Data
2021
2920
2726
2894
3227
2415
1887
1675
3081
2530
2069
2990
2658
2268
2049
Reference Material
Reference Material