FORECASTING:

QUANTITATIVE
METHOD

BY: IAN MANICIO

WHY FORECAST?

• It is useful to know the Future

• Ancient War Battle outcome

• Sports

• Business
TYPES OF FORECASTING

• Qualitative – incorporate judgement or subjective factors into the forecasting

models.

• Quantitative- are based on mathematical modeling. It applies mathematical

models to past and present information to predict future outcomes.
TIME SERIES DATA

• Sequence of data points where order indicates successive measurement over

time
TYPES OF QUANTITATIVE MODELS

Time Series
-The use of historical data to predict the future.
-Moving averages, exponential smoothing, linear trend analysis

Causal Model
-Estimates relationship between variables or factors that influence forecasted value
-Regression
TIME SERIES MODELS

1) Moving Averages

2) Weighted Moving Averages

3) Exponential Smoothing
MOVING AVERAGE (MA) MODELS

Sample:
2 Period MA

Ft+1 = (At + At-1) / 2

Ft+1 = our Forecast for the next period

At= Actual value in the current period
WEIGHTED MOVING AVERAGE (WMA)

Sample:
2 Period WMA

Ft+1 = wt (At) + wt-1(At-1)

Ft+1 = our Forecast for the next period

At= Actual value in the current period
EXPONENTIAL SMOOTHING (ES)

Formula:
Ft+1 = α (At) + (1-α)(Ft) F1=A1
α= alpha Where: α is greater than 0 but less than 1.
Ft+1 = our Forecast for the next period
At= Actual value in the current period
Ft= Forecast for the current period
CAUSAL MODEL: LINEAR REGRESSION

• Based on a straight line to data

• Explaining the change in one variable through changes in other variables

Dependent Variable = a + b(x)

Wherein x= independent variable

CHOICE OF FORECASTING METHODS

1) Accurate
2) Flexible
3) Efficient
4) Timeliness
Quality information will not generate
quality forecasts if people do not have
knowledge to process that information.
REFERENCES

• http://www.businessmanagementideas.com/management/planning-
management/forecasting-meaning-approaches-and-techniques-organisation/4723
• https://www.oreilly.com/library/view/operations-management-an/9781118122679/ch8-
sec007.html
• https://www.chegg.com/homework-help/definitions/quantitative-forecasting-methods-31
• https://gradeup.co/forecasting-study-notes-i-56de0be9-bd14-11e5-8603-247f1ba66383
• https://www.clickz.com/forecasting-techniques-part-1-quantitative-methods/80172/
• http://warwickdf.weebly.com/quantitative-method.html