Forecasting with Indices
Forecasting with Indices
Audrey Tarver
QRB/501
August 27, 2012
Ed Naser
Forecasting with Indices
The method in which reports or conclusions are made regarding the result of future occurrences is call forecasting. Businesses use forecasting to assess future market trends. Forecasting provides information used by business leaders to make vital decisions. The two methods of forecasting are the quantitative method, which takes an objective approach and the qualitative method, which takes the subjective approach. Quantitative forecasting uses historical data to calculate future data.
The time series method of forecasting is a quantitative method that uses the time series of past data of the variable for forecasting. Qualitative forecasting uses the judgment of expertise in an appropriate field to generate the forecast.
An index is a statistical measure of change. In the financial markets, each index is based upon change from a base value and has calculation specific to the individual indices. Indices aid in identifying buying trends which can be used to capitalize various markets. The most common market where indices are used is the stock market; however, indices are used in many business arenas. Lovely Baskets will use forecasting with indices to predict future trends.
Summer Historical Inventory Data
According to Sevilla and Somers (2007), “Quantitative indexes and rating systems are used to give information about general trends and to allow us to make comparisons and judgments” (p. 133). By studying the graphed version of University of Phoenix Summer Historical Inventory Data, trends for seasonal comparison can be seen.
Typical Seasonal Demand for Summer Highs
Actual Demands (in units)
Month
Year 1
Year 2
Year 3
Year 4
Forecast
1 18,000
45,100
59,800
35,500
42,960
2 19,800
46,530
30,740
51,250
37,866
3 15,700
22,100
47,800
34,400
30,818
4 53,600
41,350
73,890
68,000
59,967
5 83,200
46,000
60,200
68,100 64,064
6