ForecastingForecastingQuantitativeQualitativeCausal ModelExpertJudgmentTrendDelphi MethodTime seriesGrassrootsStationaryTrendTrend+Seasonality
Forecasting Forecasting Quantitative Qualitative Causal Model Time series Expert Judgment Trend Stationary Trend Trend + Seasonality Delphi Method Grassroots 1
Quantitative ForecastingCasualModels:PriceCausalYear 2000PopulationModelSalesAdvertisingTime Series Models:SaleS1999Time SeriesYear 2000SaleS1998SalesModelSaleS19972
Quantitative Forecasting • Casual Models: 2 Causal Model Year 2000 Sales Price Population Advertising . • Time Series Models: Time Series Model Year 2000 Sales Sales1999 Sales1998 Sales . 1997
Causal forecasting·Regression>Find a straight line that fits the data best.Best line!12108620InterceptInterce1011121314151617181920>Slope=changeiny/ changeinx3
Causal forecasting • Regression ➢Find a straight line that fits the data best. ➢y = Intercept + slope * x (= b0 + b1 x) ➢Slope = change in y / change in x 0 2 4 6 8 10 12 10 11 12 13 14 15 16 17 18 19 20 3 Best line! Intercept
Causal Forecasting Models? Curve Fitting: Simple Linear Regression: One Independent Variable (X)is used to predict oneDependent Variable (Y): Y= a + b X: Given n observations (Xi, Y), we can fit a line to the overallpattern of these data points. The Least Squares Method instatisticscan give us the best a and b in the sense ofminimizing Z(Y;- a - bx,)2:XOXEx?ZXYib=nnZxiZYiannRegression formula is an optional learning objective4
Causal Forecasting Models • Curve Fitting: Simple Linear Regression • One Independent Variable (X) is used to predict one Dependent Variable (Y): Y = a + b X • Given n observations (Xi , Yi ), we can fit a line to the overall pattern of these data points. The Least Squares Method in statistics can give us the best a and b in the sense of minimizing (Yi - a - bXi ) 2 : 4 n X b n Y a n X X n X Y b X Y i i i i i i i i = − − = − 2 2 ( ) / Regression formula is an optional learning objective
· Curve Fitting: Simple Linear Regression? Find the regression line with Excel.UseFunction:a= INTERCEPT(Yrange; Xrange)b = SLOPE(Yrange; X range)·UseSolver·Use Excel's ToolsIData Analysis I Regression? Curve Fitting: Multiple Regression. Two or more independent variables are used to predictthe dependent variable:Y= bo + biX1 + b2X2 + ... + b,X,· Use Excel's Tools I Data Analysis I Regression5
• Curve Fitting: Simple Linear Regression • Find the regression line with Excel • Use Function: a = INTERCEPT(Y range; X range) b = SLOPE(Y range; X range) • Use Solver • Use Excel’s Tools | Data Analysis | Regression • Curve Fitting: Multiple Regression • Two or more independent variables are used to predict the dependent variable: Y = b0 + b1X1 + b2X2 + . + bpXp • Use Excel’s Tools | Data Analysis | Regression 5