Question

List and briefly explain four forecasting techniques that can be used to analyse data.

Answer 1

EXPLANATION OF FOUR FORECASTING TECHNIQUES:

(1) Moving Average Technique:

Moving Average Technique takes the average of past actuals and project it forward. This method assumes that the recent past represents the future. As a result, this technique works best for products with little change. This technique uses repeated forecasts. Mathematically this is very simple, involving only minimum level. Historical datta is a prerequisite of this technique. This technique uses an average of a specified number of the most recent observations, with each observation receiving the same weight.

(2) Simple Linear Regression Technique:

This technique is used for comparing one independent variable with one dependent variable. For applying this technique, basic statistical knowledge is a prerequisite. A sample of relevant observations is required for applying this technique.

(3) Multiple Linear Regression Analysis Technique:

This technique is used to compare more than one independent variable with one dependent variable. For this technique also, statistical knowledge is required. For this technique also, a sample of relevant observations is required for analysis.

(4) Exponential Smoothing Forecasting Technique:

This technique is a weighted average procudre with weights declining as the data becomes older. It is a way of smoothing out the data by eliminating the noise ranrom effects. It is a way to take some of the random effects out of the time series by using all time series values up to the currect period.