What is linear regression forecasting? Illustrate a calculation for this method. When would linear regression be...

What is linear regression forecasting? Illustrate a calculation for this method. When would linear regression be preferred to the methods of moving average, weighted moving average, and exponential smoothing? How can one assess if there is a meaningful regression relationship?

Expert Solution

Linear regression forecasting is a method of establishing linear relationship between an independent variable and a dependent variable to find out the forecast for future periods. A calculation in this regard is shown with an example as given below.

The trendline from excel shows linear relationship between the time values and demand. This method is useful for all data where there exists a linear relationship between the two variables ( time and demand), because this trait can not be used effectively in other methods of forecasting to predict the future trends more effectively. Quality of linear regression relationship can be determined by the value of R, which is also given in the graph. The value of R square is from 0 to 1. The more close this value is to 1, stronger is the linear relationship between the variables. In this case the value is 0.9771, which indicates a very strong relationship.

keosha answered 3 months ago

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