Forecasting

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Forecasting

Making projections about future performance on the basis of historical and current conditions data.

Forecasting

The act or process of using certain data to predict future market movements. Various methods exist for forecasting; experts differ on which ones, if any, work. See also: Technical analysis, Fundamental analysis, Random walk theory.

forecasting

see SALES FORECASTING, TECHNOLOGICAL FORECASTING.
Forecastingclick for a larger image
Fig. 75 Forecasting. The margin of error expected in economic forecasts.

Forecasting

The process of making predictions about future general economic and market conditions as a basis for decision-making by government and business. Various forecasting methods can be used to estimate future economic conditions, varying greatly in terms of their subjectivity, sophistication, data requirements and cost:
  1. survey techniques, involving the use of interviews or mailed questionnaires asking consumers or industrial buyers about their future (buying) intentions. Alternatively, members of the sales force may provide estimates of future market sales, or industry experts can offer scenario-type forecasts about future market developments.
  2. experimental methods, providing demand forecasts for new products, etc., based on either the buying responses of small samples of panel consumers or large samples in test markets.
  3. EXTRAPOLATION methods, employing TIME-SERIES ANALYSIS, using past economic data to predict future economic trends. These methods implicitly assume that the historical relationships that have held in the past will continue to hold in the future, without examining causal relationships between the variables involved. Time-series data usually comprise: a long-run secular trend, with certain medium-term cyclical fluctuations; and short-term seasonal variations, affected by irregular, random influences. Techniques such as moving averages or exponential smoothing can be used to analyse and project such time series, though they are generally unable to predict sharp upturns or downturns in economic variables.
  4. Barometric forecasts to predict the future value of economic variables from the present values of particular statistical indicators which have a consistent relationship with these economic variables. Such LEADING INDICATORS as business capital investment plans and new house-building starts can be used as a barometer for forecasting values like economic activity levels or product demand, and they can be useful for predicting sharp changes in these values.
  5. INPUT-OUTPUT methods using input-output tables to show interrelationships between industries and to analyse how changes in demand conditions in one industry will be affected by changes in demand and supply conditions in other industries related to it. For example, car component manufacturers will need to estimate the future demand for cars and the future production plans of motorcar manufacturers who are their major customers. (f) ECONOMETRIC methods predicting future values of economic variables by examining other variables that are causally related to it. Econometric models link variables in the form of equations that can be estimated statistically and then used as a basis for forecasting. Judgement has to be exercised in identifying the INDEPENDENT VARIABLES that causally affect the DEPENDENT VARIABLE to be forecast. For example, in order to predict future quantity of a product demanded (Q d), we would formulate an equation linking it to product price (P) and disposable income (Y ):

then use past data to estimate the regression coefficients d, b and c (see REGRESSION ANALYSIS). Econometric models may consist of just one equation like this, but often in complex economic situations the independent variables in one equation are themselves influenced by other variables, so that many equations may be necessary to represent all the causal relationships involved. For example, the macroeconomic forecasting model used by the British Treasury to predict future economic activity levels has over 600 equations.

No forecasting method will generate completely accurate predictions, so when making any forecast we must allow for a margin of error in that forecast. In the situation illustrated in Fig. 75, we cannot make a precise estimate of the future value of an economic variable; rather, we must allow that there is a range of possible future outcomes centred on the forecast value, showing a range of values with their associated probability distribution. Consequently, forecasters need to exercise judgement in predicting future economic conditions, both in choosing which forecasting methods to use and in combining information from different forecasts.

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Brits can expect a sunny weekend, although it won't be very warm - and forecasters are warning people to brace for snow.
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Now in its 15th year, DNV GLs Forecaster suite offers the most comprehensive set of forecasting capabilities available.
Unlike retrospective recall information, the forecaster's eye gaze data can be used to obtain detailed information about the spatial distribution and temporal trends of these fixation measures in each of the three AOIs.
Table 3 shows a stylised calculation of bias and RMSE for two hypothetical forecasters. Note that the RMSE returns a larger value for the case of a forecaster that makes a single large error compared to a forecaster that makes a sequence of smaller errors.
'Our Retirement Forecaster also allows an adviser to present 'what if?' scenarios showing a client the impact of small changes, for example in contributions or retirement age, to demonstrate the impact on likely retirement income.
The most accurate forecaster is the one whose forecast probability distributions get closest to the dis-tribution of actual outturns over time.
BIRMINGHAM could sizzle in hot and humid temperatures of 80F this weekend - after forecasters put parts of the UK on tornado alert.
PAGASA weather forecaster Denison Estareia noted that contributing to the fair weather forecast is the absence of a low pressure area or potential storms within the Philippine area of responsibility.
cart0301According to forecaster Jaime Bordales, the highest temperature in Metro Manila on Saturday was recorded at 33.5 degrees Celsius at 1:50 p.m., slightly lower than Friday's highest temperature in the metropolis at 34.3 degrees around 2 p.m.
Heim, a weather forecaster for Channel 10 in Providence, said high pressure over the United States has kept the few storms that have formed from threatening New England.
However, a representative from law firm, Irwin Mitchell, was quoted in the Daily Mirror, saying, 'There would need to be a contract between the forecaster and the individual with duty of care for a breach to be recognised.'