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

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