Forecasting Techniques

• No trend in the data pattern the forecaster

• In statistical terms we refer to this as a stationary
pattern.
• In such a situation, the forecaster is equally likely to
observe the next value of the series to be above or
below the stationary value
Data
Patterns:
Horizontal
 Data Patterns:
Trend

• The trend pattern is a long-term growth

movement of a time series.
• The trend may be upward, downward, or
steady
• In business and economics we associate
trend patterns with evolving consumer
preferences, changes in technological
developments, the gross national product,
changes in income, stock prices, industrial
expansion, and changes in government tax
policies
• Yt = a + βt β > 0
Data Patterns: Seasonal
• When a predictable and repetitive movement is observed
around a trend line within a period of one year or less
• To be able to analyze seasonal variations, we must have data
that are reported weekly, monthly, quarterly, etc
• When a firm chooses to report its profit and loss on a
quarterly basis, we refer to this as an internally-induced
seasonal pattern, whereas factors such as the weather bring
about an externally induced “season.”
• Examples of seasonal patterns of data are in the sales of
clothing, heating oil, and the number of new cars sold during
a certain period in the year due to model changes.
Seasonal Data
Pattern
 • Occurs with business and economic expansions
and contractions.
• Although there are similarities to a seasonal
pattern, cyclical movements vary in length,
Data usually lasting longer than 1 year.
• Cyclical patterns differ in intensity or
Patterns: amplitude, and are correlated with business
cycles in a national economy.
Cyclical • In forecasting, cyclical patterns are most difficult
to predict because cycles do not repeat
themselves at constant intervals of time.
• Hence, it is impossible to distinguish between
cyclical behavior and smoothly evolving trend.
 Contoh Actual Size Predicted Size
Minggu (dalam $ Ribu (dalam $ Ribu
• Misalkan sorang manajer pemasaran
melakukan prediksi penjualan dengan 1 34
menggunakan metode Naïve 2 35 34
• Naïve: menggunakan data terakhir
masa lalu untuk memprediksi 3 37 ?
penjualan periode berikutnya
4 35 ?
• Jelaskan jenis datanya?
5 4 ?
6 39 ?
7 45 ?
8 41 ?
9 ? ?
 • et = Yt −Ytˆ
• et = prediction error
• Yt = actual or observed value
• Yˆt = predicted or forecast value

Mean • Untuk bisa mengukur akurasi prediksi dengan

sistem ini maka kita bisa mengukur Mean Absolute
Deviation (MAD)
Absolute • Semakin kecil MAD semakin akurat prediksi
Deviation
(MAD)
 • Useful if management is not too concerned with
consistent small error, but rather wants to minimize
the occurrence of a major error.
• Mean squared error penalizes a forecast much more
for extreme deviations than it does for small ones.
Mean • A major limitation of the MSE is its interpretation.
square
error
(MSE)
 • As a measure of accuracy of a forecast.
• This measure is similar to MAD except that it is expressed in
percentage terms.

Mean • The advantage of the measure is that it takes into account the
relative size of the error term to actual units of observation.

absolute
percentag
e error
(MAPE)
MAD
• MADRata-rata error ketika menggunakan MAD adalah $3.000
• It is easier to interpret, and the methodology gives equal weight to
each term)
• MAPE is 7.45 percent. On average, we would expect a 7.45 percent
error with this data set.
Mean percentage error
• To determine whether such a bias is present in a technique, forecasters depend on
the mean percentage error as a measure of accuracy. It is computed as follows:

• With no bias detected in the technique, the MPE is expected to be zero

• If the computed MPE is a large positive percentage, then the forecasting method
is consistently underestimating.
• On the other hand, if the MPE is a large negative value, then the forecasting
method is consistently overestimating.
• The small MPE of 2.29 percent implies
that the technique does not
consistently over- or underestimate the
sales of this e-commerce company
RMS & R%MS
• Management is also interested in evaluating the reliability of a
forecast with actual performance.
• Ex post evaluation depends on the error between the ex post forecast
and actual observation.
• The root mean square (RMS) and root percent mean square (R%MS)
are used for this purpose.
The root mean square is
interpreted in a similar fashion to
MAD

The root percent mean square (R

%MS) is the average error that is
measured in percentage terms.

This measure of error is similar to

MAPE
 Quantitative models,
Forecastin
g
Methodolo Qualitative models,
gies
Technological
approaches
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