Question

Explain what conditions make quantitative forecasting methods appropriate.

How can error measures be used to determine the number of periods to use in a moving average? What are you assuming about the future when you make this choice?

Answer 1

Quantitative forecasting using to forecast specific business factors like production , demand, man power requirement etc. When historical data is available for a variable of minimum 3-4 years we can use quantitative forecast.

We use forecasting model to make forecast. Common model used to do forecasting are arima, sarima, exponential smoothing etc. This model consider historical data . also, model consider basic element like trend, cyclicity and seasonality in the data. So, we get estimation of volume for future, which help business tom manage its resource better.

Error give us how our forecast differs from actual event. In moving average we take average of two, three or six months. Which average give use less error we take that method for consideration. So,

error measured help us to get the correct period to take the average.

We assume that in future there will be no major event or event like business cycle, natural calamity will hit the business. Also, we take into the factor like business growth and steady growth in the market.