Operations research
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Forecasting Methods Ranked for Exams
Ranking forecasting methods by how often they score you marks
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Lesson notes
Key points
- Delphi method: Useful to name in theory questions, but you rarely calculate anything with it.
- Weighted moving average: A quick calculation, but just a moving average with weights summing to one.
- Simple moving average: Easy marks: average the last n periods, but it lags behind trends.
- Linear regression trend: Fitting y equals a plus bx tests least squares formulas and appears often.
- Exponential smoothing: New forecast equals old forecast plus alpha times the error; examiners love it.
Takeaway: Exponential smoothing: new forecast = old + α × error.
Quick check: In exponential smoothing, what is the old forecast corrected by?
- Alpha times the last error
- The average of n periods
- The slope of a trend line
F(t+1) = F(t) + α(actual − F(t)).
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