Question

Explain the Difference between a simple trend model and a causal model

Answer 1

Difference between a simple trend model and a casual model

A simple trend model or linear trend model is a statistical technique used for data interpretation in a simplest way. Observed data behavior can be traced through this model without further explanation.The application of simple trend model is on the operation management basics.This model depicts a best fit line to the historical timeseries data. For example, through this model, we can predict the future product demand based on the past sales report. The data is a linear function of time and it represents a linear relationship between independent and dependent variables. Based on the observed values of the independent variable, it predicts the future trend of the dependent variable.There is no multi co-linearity or cause effect relationship between variables in this model.This model is completely based on statistical concepts like regression ,propensity score etc.

A casual model on the other hand is a granular level forecasting model where we can analyse multiple factors impacts on dependent variable. There is a cause effect relationship between independent variables and dependent variable and it analyse the effects and also the magnitude of the effects between the variables. Due to multi co-linearity , this model is more complex in nature.Casual model involves a strong theoretical logical linking and use path analysis for analyzing the relationship between variables.Casual model based on casual assumptions.