Question

Why is the trend commonly thought to be the most important component of forecasting? How is the linear trend method related to linear regression? Why are simple moving averages and weighted averages commonly used forms of forecasting?

Answer 1

Trend is the tendency of the data to increase or decrease or stable at different sections of time. Trend is an important component in forecasting as it uses statistical tools to visualize the relationships between variables and to detect the outliers. Without trend analysis our forecasting would not be as accurate as we want it be.

When a time series shows an upward or downward linear trend over time, regression analysis can be used to estimate this trend and to forecast the future values. In this way linear trend and linear regression analysis are related.

Simple moving averages and weighted averages arecommonly used forms of forecasting as these averages are easy to calulate and these avarages havewidely used applications