Techniques

The techniques used in forecasting allow current data and assumptions to be used as the basis of future scenario development.

Forecasting techniques can be divided broadly into three categories :

• Time Series Modelling

An analysis of past patterns of activity, which can be extended into the future, on the assumption that these patterns will continue.

• Causal Modelling

An analysis of relationships in the market – eg more advertising stimulates buying activity; winter brings on more infections. Assuming these relationships remain stable, future conditions can be forecasted by knowing how the ‘predictor’ variables will develop.

• Judgmental Modelling

This includes non-statistical aspects of subject knowledge such as experience, market research, etc.. Within this group are all the future events that can be predicted by human forecasts, but which do not appear in historical records – such as known future events, changes in policy, pricing, etc..

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