Forecasting Module 2. Learning Objectives. Trended Data. By Sue B. Schou Phone:

Transcription

1 Forecasting Module 2 By Sue B. Schou Phone: schosue@isu.edu Learning Objectives Make forecast models using trend analysis in Minitab Make forecast models using Holt s exponential smoothing in Minitab Determine best forecast model Trended Data Graph time series data to ensure it is trended only. Make all possible forecast models appropriate for the data. Compare the models using a measure of forecast error. Choose the best model. 1

2 Graph Data Net Sales for Kodak Co (in millions) Year Trend Analysis: Linear Trend Analysis: Linear Trend Analysis Plot for Linear Trend Model Yt = *t Variable Actual Fits MAPE MAD MSD Index

3 Trend Analysis: Linear Trend Analysis for Data Length 2 NMissing 0 Fitted Trend Equation Yt = *t MAPE MAD MSD Period Forecast for the next three years Trend Analysis: Quadratic Trend Analysis Plot for Quadratic Trend Model Yt = *t *t**2 2 Variable Actual Fits MAPE.7844 MAD MSD Index Trend Analysis: Quadratic Trend Analysis for Data Length 2 NMissing 0 Fitted Trend Equation Yt = *t *t**2 MAPE.7844 MAD MSD Period Forecast

4 Trend Analysis: Exponential Trend Analysis Plot for Growth Curve Model Yt = * (1.071**t) 0 2 Variable Actual Fits MAPE 8.14 MAD MSD Index Trend Analysis: Exponential Trend Analysis for Data Length 2 NMissing 0 Fitted Trend Equation Yt = * (1.071**t) MAPE 8.14 MAD MSD 1.27 Measures of forecast error Period Forecast Comparing Models Measures of Forecast Error MAPE: Mean Absolute Percentage Error MAD: Mean Absolute Deviation MSD: Mean Square Deviation 4

5 Comparing Models Use any one of the measures of forecast error Least error is best Look for the smallest number Comparing Models Linear Quadratic Exponential MAPE MAD MSD Quiz Time Which is the best model of the three done so far: linear, quadratic, or exponential? Linear Quadratic Exponential MSD

6 Answer The quadratic model is best since it has the lowest MSD. You could have used any of the other measures of forecast error and still had the same answer. Holt s Exponential Smoothing Called double exponential smoothing in Minitab Requires setting of two parameters: level and trend Choose numbers between.1 and. May choose to let computer optimize Parameters must be between 0 and 1 Holt s Exponential Smoothing

7 Holt s Exponential Smoothing Double Exponential Smoothing Plot for 2 Variable Actual Fits.0% PI Smoothing Constants Alpha (level) 1.17 Gamma (trend) MA PE MA D 0.42 MSD Index Holt s Exponential Smoothing Holt s Exponential Smoothing Double Exponential Smoothing Plot for 2 Variable Actual Fits.0% PI Smoothing Constants Alpha (level) 0. Gamma (trend) 0.1 MA PE.111 MAD MSD Index 7

8 Holt s Exponential Smoothing Double Exponential Smoothing for Data Length 2 Smoothing Constants Alpha (level) 0. Gamma (trend) 0.1 MAPE.111 MAD MSD Period Forecast Lower Upper Comparing Models Holt s Quadratic MSD Quiz Time Which model is the best forecast model---holt s exponential smoothing or the quadratic model? Holt s Quadratic MSD

9 Answer The Holt s exponential smoothing model is the best model because it has the lowest MSD. Trended Data Graph time series data to ensure it is trended only. Make all possible forecast models appropriate for the data. Compare the models using a measure of forecast error. Choose the best model. Minitab Instructions Available on the website Trend Analysis video Holt s Exponential Smoothing video Handouts with written instructions

10 Assignment Located on the website: - problems to work -answers available Questions? Statistics Lab located in BA 111 Hours: MW 4-pm TTH :-pm F 12-2pm